Gold prices remain significantly below their January peak, but robust demand from both institutional and retail investors indicates further potential for price appreciation. UBS Global Wealth Management's Chief Investment Office, in its latest report, maintains that gold serves as an effective tool for portfolio diversification and wealth preservation. The firm forecasts the price of gold will rise to $5900 per ounce by year-end.
Demand for gold bars and coins has surged to record levels. The World Gold Council's report highlighted a notable 42% jump in bar and coin demand. Global demand reached 474 metric tons, marking the strongest quarterly performance on record for personal physical gold purchases, with buyers primarily from Asian markets. This indicates robust demand not only from institutional investors but also from retail investors actively utilizing gold for diversification.
Furthermore, sovereign demand remains strong. Central bank purchases increased by 3% to 244 metric tons. This pace suggests full-year central bank buying will remain between 900 and 1000 metric tons, consistent with the high levels of recent years. Significant interest from Middle Eastern sovereign wealth funds signals that institutional demand is broadening. Official sector buying is expected to continue providing structural support for gold prices.
Consequently, UBS views the recent weakness in gold prices as temporary. While ongoing uncertainties in the Middle East may prevent a sharp near-term price surge, the bank remains optimistic about gold's role in preserving wealth. Concerns over political instability and fiscal deficits are anticipated to further underpin demand. A weakening US dollar towards the end of the year is also expected to benefit gold's performance.
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