Feb 05, 2024 07:29 AM EST
UBS predicts that gold and silver are likely to see increases in 2024 due to expectations of the U.S. Federal Reserve reducing interest rates.
The inverse relationship between interest rates and gold prices makes gold more attractive as rates decline, leading to increased demand and a potential devaluation of the dollar.
Silver, considered gold's "poor cousin," is expected to perform well, especially if the Federal Reserve eases its policy. Silver's industrial uses and potential as a safe-haven asset contribute to its positive outlook.
2024 will likely see more increases in gold and silver due to anticipation that the U.S. UBS predicts that the Federal Reserve will begin reducing interest rates.
Interest rates and gold prices typically have an adverse connection. Compared to other assets like bonds, which would provide lesser returns in a low interest rate environment, gold becomes more alluring as interest rates decline.
Lower interest rates, in turn, devalue the dollar, lowering the price of gold for purchasers abroad and increasing demand.
UBS reaffirmed its predictions that the Federal Reserve will loosen policy, despite the fact there is still a great deal of ambiguity around the timing and scope of rate decreases. The Federal Reserve debunked expectations of a rate reduction in March and revealed last week that it will maintain rates in January.
Since Israel's war with Hamas began on October 7, the attraction of metal as a safe haven asset has increased, which helped drive gold prices to an all-time high of $2,100 an ounce last month.
Silver, gold's "poor cousin," is expected to "really, really shine," adding to the positive outlook for the metal.
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The expert explained that silver has underperformed gold in recent years in part because it is not as popular as gold as a geopolitical and safety refuge. But when the Fed loosens, the odds may be on its side.
Because of its numerous industrial uses, the performance of silver is strongly correlated with the state of the economy as a whole. Precious metals are frequently used in the production of electronics, solar panels, cars, and jewelry.
Silver was valued at $22.69 per ounce, while gold was recently sold at $2,052 per ounce.
Analysts predict that gold and silver will dominate the precious metals market because they believe that palladium and platinum have less promise.
The study predicts that the average price of platinum will be $1,015, which is 5.2% more than the $952.88 per ounce average for the previous year.
The LBMA notes that although price expectations for the upcoming period are relatively modest, there is a potential for volatility, with a spread of $529 between the lowest low and the highest high. Despite being most bearish on gold prices, Steele expresses bullish sentiment for platinum, projecting a trading range of $875 to $1,329, with an annual average around $1,105. Steele attributes the anticipated volatility in platinum to factors such as increased auto demand, driven by substitution for more expensive palladium, continued global vehicle production recovery, and positive trends in jewelry and industrial demand, particularly in environmental and pollution control applications. He expects the structural market deficit observed in 2023 to persist at a similar level throughout 2024.
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