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UBS predicts dramatic increases for gold and silver prices amid expected US Fed rate cuts

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By Colin Hay - 
US Federal Reserve interest rates gold precious metals
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While the market continues to maintain a close watch on any moves coming from the US Federal Reserve, many analysts are confident a major boost is coming for precious metals prices in 2024.

That includes international financial institution UBS, which remains very bullish on gold, silver and platinum.

The investment bank’s precious metals strategist Joni Teves recently forecast dramatic price increases for both gold and silver, largely based on a belief that the US Federal Reserve would start cutting interest rates in the future.

“We are expecting gold to be pushed higher by a Fed easing. Also, this comes with a weaker dollar,” Ms Teves – who has tipped gold to hit around US$2,200 per ounce by the end of the year – said in a recent interview.

“So, regardless of when we expect the Fed to cut or how much they’re going to cut, the expectation of the market is that policy is going to be eased and that is bullish for gold.”

“Rates are expected to go lower, which is also bullish [and] the overall macro backdrop where there’s a lot of uncertainty also kind of justifies having an allocation to gold in the portfolio as a diversifier.”

“I think that’s been holding up gold prices.”

Cleanest investment play

Ms Teves believes gold is probably the cleanest play right now but that other precious metals could well follow suit.

“Silver and platinum are probably the ones that can benefit most from a move higher in gold particularly because they have been lagging the price action quite a lot over the past year,” according to Ms Teves.

Along with the expectations of the Federal Reserve making monetary moves as inflation concerns ease, there is also a strong belief it will cut interest rates in this US election year.

Lower interest rates generally lead to a weakening of the US dollar, making gold more affordable for international buyers.

This in turn stimulates demand, thus increasing the attractiveness of gold as an investment.

Safe haven

Elsewhere, ongoing geopolitical issues are also supporting gold’s place as a safe haven asset.

The Israel-Hamas conflict is credited with creating a record gold price of US$2,100/oz earlier this year.