Gold and silver are anticipated to experience upward momentum in 2024, driven by UBS’s forecast that the U.S. Federal Reserve will initiate interest rate cuts. UBS’s precious metals strategist, Joni Teves, predicts that gold could reach $2,200 per ounce by the end of the year. The relationship between gold prices and interest rates is inversely proportional, with lower interest rates making gold more attractive compared to other investments like bonds. This scenario is reinforced by the expectation of a weaker dollar, making gold more affordable for international buyers and boosting demand.
Despite uncertainties regarding the timing and extent of rate cuts, UBS maintains its outlook for the Federal Reserve to ease policy. The recent decision to keep rates unchanged in January, coupled with the dismissal of expectations for a March rate cut, further supports this stance. The ongoing geopolitical tensions, particularly Israel’s conflict with Hamas, have enhanced gold’s appeal as a safe haven asset, resulting in the metal reaching an all-time high of $2,100 per ounce.
UBS envisions that investors will increasingly allocate resources to gold amid macroeconomic uncertainty and geopolitical risks. Additionally, silver, often considered gold’s “poorer cousin,” is expected to shine prominently. While silver has historically underperformed gold, UBS anticipates a reversal of this trend when the Fed eases. In such a scenario, silver is projected to outperform gold significantly, representing a potentially dramatic shift.
Silver’s performance is closely linked to the overall health of the economy due to its extensive industrial applications. The precious metal is integral to the manufacturing of various products, including automobiles, solar panels, jewelry, and electronics.
As of the latest trading data, gold is priced at $2,052 per ounce, while silver is valued at $22.69 per ounce. The forecasted trends in gold and silver are contingent on the Federal Reserve’s policy decisions and the broader economic landscape.