Cooling Rates to Lift Gold Prices to $2.2K, Boost Silver – UBS

BySamson Ononeme

Feb 5, 2024 ,
Gold prices could top $2,200/oz while silver dramatically outpaces it, UBS forecasts, with both precious metals buoyed by expectations of looser U.S. monetary policy and global uncertainties.

Key Insights

  • UBS forecasts gold hitting $2,200/oz in 2024, silver also seen rallying as Fed expected to start cutting interest rates
  • Precious metals to benefit from rate cuts and weaker dollar which increases appeal and affordability
  • Silver can “really shine” by dramatically outperforming gold in a rate-cutting environment as industrial demand also robust

LONDON (MarketsXplora) – Gold and silver prices are poised for further gains this year as the U.S. Federal Reserve is expected to start cutting interest rates, which typically benefits the precious metals by decreasing the opportunity cost of holding them, UBS said on Monday.

The Swiss investment bank forecasts that gold prices will reach $2,200 per ounce by end-2024, driven higher as the Fed begins policy easing and the dollar weakens as a result, said precious metals strategist Joni Teves.

Lower rates dent the dollar, making dollar-priced gold less expensive for foreign buyers and boosting demand. They also make the non-yielding metal more appealing compared to yield-bearing bonds and other assets.

“We are expecting gold to be pushed higher by a Fed easing. Also this comes with a weaker dollar,” Teves told MarketsXplora.

While the timing and magnitude of U.S. easing remains uncertain, UBS is sticking to bets for Fed rate cuts even after the central bank last week signalled steady rates.

Teves said gold has proven itself as a safe-haven this year amid market uncertainties like Israel’s war with Hamas and record high inflation, hitting an all-time peak of $2,100 last month.

“Investors will start to build allocations to gold in an environment where there is a lot of macro uncertainty (and) geopolitical risks,” she added.

Meanwhile, silver “can really, really shine” when rates fall as it tends to outperform gold, she said, without giving a specific forecast.

“Silver has been underperforming gold quite a lot. So there is a lot of catching up to do and I think the move could be quite dramatic.”

Beyond monetary policy, silver will be supported by solid industrial demand given its wide manufacturing use.

Samson Ononeme

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