Neutral On Gold In 2018 - UBS Strategist
There is no near-term catalyst that is powerful enough to move gold prices significantly higher or lower, according to UBS strategist Joni Teves, who projects that the metal will average $1,285 next year.
“Against this backdrop, it becomes difficult to justify a strong rally in gold prices. Yet, we don’t think there is a compelling reason for a sell-off either. Our assessment of the global macro landscape is instead more consistent with gold prices that are likely to be well-supported, yet capped at the same time,” Teves said in a note published on Thursday.
At the same time, Teves highlighted that gold remains a prime asset for investors who are looking to diversify and use the precious metal as a hedge against risks.
“Growth dynamics are improving, and, although the momentum this year is unlikely to be replicated in 2018, growth is likely to remain steady,” Teves said.
Some of the main drivers for gold are also changing. The strategist pointed out that the U.S. dollar is estimated to surge against the Japanese yen in 2018, but to fall against the euro. On top of that, the geopolitical risks are also looking to be less severe in 2018, according to Teves.
But, don’t expect investors to be selling their gold assets next year.
“In our view, the market doesn't really have enough froth to necessitate and trigger a significant sell-off, not least one that's reminiscent of 2013,” Teves said. “Overall gold positions remain lean. Our analysis suggests that investors' exposure to gold has not increased dramatically over the past couple of years despite gold's gentle recovery from the end-2015 lows.”
So far this year, gold is up around 12%, with December Comex gold last seen trading at $1,276.50, up 0.18% on the day.