Buy gold as a hedge against these risks: UBS By Investing.com

Investing.com — Analysts at UBS reaffirmed their bullish stance on gold in a note this week, highlighting its value as a hedge against growing macroeconomic and geopolitical uncertainties.

UBS pointed out that gold has risen 23% this year, hitting all-time high spot prices due to a combination of factors such as “expectations of lower US yields and the continued trend of central banks diversifying into the USD”.

UBS advises investors to consider an allocation of around 5% to gold in a balanced USD portfolio.

According to the bank’s analysts, gold has historically outperformed stocks during periods of high volatility, a trend that has been proven again in recent months.

Despite reduced expectations for more Federal Reserve interest rate cuts following the US CPI release, gold remains strong, especially with support from European Central Bank rate cuts.

While prices eased briefly after U.S. core inflation unexpectedly rose, UBS viewed it as a temporary fluctuation.

The bank’s mid-2025 target remains at $2,700/oz, supported by rising demand from gold ETFs.

Physically-backed gold ETFs posted their fourth straight month of inflows in August, driven by “increasing safe-haven demand” and cooling US labor markets.

UBS pointed out that North America saw strong inflows, while Asia, particularly India, continued its positive trend thanks to favorable fiscal and budgetary changes.

UBS remains “Gold Most Preferred” in its global asset allocation strategy. Given its hedging properties, the bank concludes that gold remains an essential part of a diversified investment strategy, especially as uncertainty continues to dominate the global economic landscape.