UBS expects gold price of $2,100 per troy ounce

The Gold price may rise further in the near future due to continued uncertainty and negative real interest rates. That's what Yeoh Choo Guan of the Swiss UBS says in an interview with CNBC. The bank raised its price target on gold for next year from $1,850 to $2,100 per troy ounce. At the beginning of August, gold was already on its way to that level, when the precious metal hit a new all-time high of $2,067 per troy ounce Reached. This was followed by a correction and since then the price has fluctuated around $1,950 per troy ounce.

"We are very positive about gold. We think the gold price will continue to rise. We also expect the price to remain at a high level for longer. An environment with negative real interest rates and uncertainties such as the US presidential election are reasons for investors to expand their position in gold. Recently, we have seen a correction in the stock market. It was interesting to see that gold held up well, despite the decline in stock prices. That suggests there's still a lot of support to buy."

Also, according to UBS, gold remains a very attractive form of portfolio diversification. For many investors, the precious metal is an interesting alternative as soon as investments such as real estate and bonds come under pressure. The precious metal is benefiting from a flight to safe havens and negative interest rates on government bonds. Since the beginning of this year, the Gold price in dollar terms increased by 28%. This makes the precious metal one of the best-performing investments this year.

Gold shifts from east to west

Due to the corona crisis, the demand for precious metals has increased sharply this year. Especially in the United States and Europe, gold and silver were in short supply from March onwards. This caused logistical problems, partly because smelters temporarily closed their doors and limited air traffic was possible. At the same time, the demand for gold in countries such as India and China almost completely disappeared. Due to the high prices, consumers postponed the purchase of gold. Also, many people in those countries had to Selling gold, because their income decreased or temporarily disappeared altogether due to the corona crisis.

This is also reflected in figures from the World Gold Council and in the trade statistics of the Swiss Customs. In recent months, Switzerland has exported almost exclusively gold to the United States and to London. In August, for the first time in five months, a flow of gold started towards China. This is despite the fact that China and India are normally the most important markets for the precious metal. This shift shows that the rally in gold this year is mainly driven by Western investors. Also Central Banks continue to buy gold, but are now doing so in a Slower pace than in previous years.

In recent months, Switzerland has exported almost exclusively gold to the US and the United Kingdom (click for a larger version)