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Gold and silver are expected to rise further in 2024 on expectations that the Federal Reserve will start cutting interest rates, says Joni Teves, precious metals strategist at UBS, who expects the yellow metal to reach $2,200 l ounce by the end of the year.
Even as the Fed has dismissed hopes of a rate cut in March in recent days, UBS has maintained its expectations of the Federal Reserve easing policy.
While there is a lot of uncertainty about the timing and extent of the Fed’s cuts, “the bottom line is that the market expects the Fed to ease policy and U.S. rates to fall,” Teves said.
There is also the “prospect of greater macroeconomic volatility during an unprecedented year, when four billion people will vote in 76 elections,” which makes “the idea of having an allocation to gold as a diversifier” attractive, according to Teves.
“We believe investors will begin to increase allocations to gold in an environment characterized by a lot of macroeconomic uncertainty [and] geopolitical risks,” Teves said.
Silver, while not as common as a geopolitical and safety haven compared to gold, could “really shine” in a Fed-easing scenario, where silver “tends to outperform a move in the gold,” Teves said.
The UBS analyst noted that silver “has underperformed gold quite a bit, so there’s a lot of catching up to do and I think the move could be quite dramatic.”
Delivery of front-month Comex gold (XAUUSD:CUR) for February closed on Monday -0.5% at $2,025.70 an ounce, while February Comex silver (XAGUSD:CUR) closed -1.6% at $22,335/oz.
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Gold prices fell to weekly lows as the US dollar strengthened, following more hawkish comments from Fed Chair Jerome Powell and last week’s strong monthly jobs report that dashed hopes of a cut of interest rates in March.