Recent Gold Performance and Current Context
Gold prices edged higher despite investor caution following this week's sell-off. The precious metal edged higher on Thursday, closing near $4,120 an ounce, ending a two-day slide as investors assessed trade developments and geopolitical tensions that have increased the metal's safe-haven appeal.
Although gold had declined earlier in the session following the largest daily outflow from gold-backed exchange-traded funds in five months, this inflow suggests some profit-taking, an indicator of a technical correction.
Investors are now monitoring upcoming US-China trade talks, which could dampen demand for the precious metal as a safe haven.
Reports indicated that the United States is considering restrictions on Chinese software exports, although President Donald Trump later confirmed plans to meet with Chinese President Xi Jinping.
Meanwhile, Washington announced new sanctions on Russia, following reports that a planned Trump-Putin summit had been postponed after Moscow refused to accept a ceasefire in Ukraine.
Expectations that the Federal Reserve will make two additional interest rate cuts by the end of the year also supported gold prices.
On the other hand, Mark Haefele, Chief Investment Officer of Global Wealth Management at UBS, said, "We continue to see gold as a viable investment, with further gains toward our bullish forecast of $4,700 per ounce in the event of adverse economic and political developments."
Key Factors UBS Sees as Possible Support for Gold Prices
- Historically, sustained reversals in gold prices have often been triggered by a change in Federal Reserve policy. However, the US central bank remains on track to cut interest rates further.
- Global gold exchange-traded funds attracted $17 billion in inflows last month, the largest monthly increase on record, according to the World Gold Council.
- With the ongoing US government shutdown and ongoing economic and geopolitical uncertainty, UBS expects continued demand for safe haven assets to support precious metals.
