UBS: Rising inflation beneficial for gold

The price of gold is already up almost 7% this year, but rising inflation and more political uncertainty could push the price even higher. That's according to analyst Dominic Schnider of the Swiss UBS in an interview with CNBC. He expects the price of the precious metal to rise further to $1,300 per troy ounce this year.

"There are quite a lot of uncertainties in the market. Inflation will rise faster than interest rates, which is beneficial for so-called 'hard assets'. On top of that, we see the dollar weakening again in a broad sense. This combination can cause prices to rise."

Dominic Schnider sees gold price rise to $1,300  per troy ounce

Fed rate hike

The Gold price started to fall late last year ahead of the U.S. central bank's interest rate hike, but since then, the price of the precious metal has been on the rise again. That's because the adverse effect of rising interest rates is overshadowed by a rapid rise in inflation.

Investors are therefore eagerly awaiting Federal Reserve Chair Janet Yellen's speech . In the context of transparency, she will answer questions about monetary policy in the US House of Representatives . Investors expect to get more clarity on the pace of interest rate hikes from the Federal Reserve.

"The economy is expected to grow a bit faster this year than last year, but it won't be much. You can say that Trump will bring a lot of fiscal stimulus and that economic growth will increase by four percentage points, but we think that is unlikely. We first have to see that these proposed measures get through the US Congress."

Dominic Schnider expects that the Federal Reserve will take more time for interest rates to normalize due to all the uncertainty. A too rapid rise in interest rates will not only slow down domestic economic growth, it could also adversely affect the export position of American companies. After all, when interest rates rise, the value of the dollar rises.