MW Gold is up 5% this week because it's a 'preferred' hedge to global risks, UBS says
By Joy Wiltermuth
Gold's weekly gains are outperforming the stock market
Gold prices were heading for a more than 5% weekly gain as missile attacks between Russia and Ukraine intensified, stoking demand for haven assets.
With gold for December delivery (GC00) (GCZ24) near $2,706 an ounce on Friday, the precious metal was on pace for a 5.3% weekly gain, based on the most active contract. That would mark its best week since March 2023, according to Dow Jones Market Data. Prices also were only about 3.4% off their record closing high of $2,800 in late October.
The big weekly gains reinforced gold's role as the "preferred hedge against geopolitical tensions," a team led by Solita Marcelli, chief investment officer Americas, global wealth management at UBS Financial Services, wrote in a Friday client note.
"Russia on Thursday launched an experimental hypersonic missile at central-eastern Ukraine in what Ukraine's President Zelenskiy called 'a clear and severe escalation,'" the UBS team wrote.
"This follows Ukraine's use of advanced western missiles ontargets in Russia, and Moscow's deployment of North Korean troops intoactive combat theaters."
With that backdrop, UBS has kept its $2,900 target for gold through year-end 2025, in part because it also has been a hedge against "political pressures including higher government debt levels."
Read: Buy gold after its pullbacks - because it may hit $3,000 in 2025
The UBS team said the U.S. dollar DXY was "entering a phase of uncertainty," despite potential "growth-friendly" U.S. policy and potential tariffs, which should support a stronger dollar in the near term.
"But we think USD strength has limits, and that the dollar's valuation maynow be stretched," the team wrote.
Several global central banks have been increasing gold reserves while lowering their dollar holdings. The first Trump administration's policies on tariffs and international blowback from Russia's invasion of Ukraine in early 2022 have been pegged as catalysts for the shift.
Watch: Gold prices surged in 2024-will they hold under new Trump policies?
U.S. stocks also were heading for weekly gains but were more muted. The S&P 500 index SPX was up around 1.6% on the week through Friday, the Dow Jones Industrial Average DJIA 1.6% higher and the Nasdaq Composite Index COMP was up 1.6%, according to FactSet.
For the year, gold also was leading the charger higher, up 30.7% through Friday, versus the S&P 500's 25% climb in 2024.
-Joy Wiltermuth
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(END) Dow Jones Newswires
November 22, 2024 12:21 ET (17:21 GMT)
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