UBS sees gold prices dropping to $1,600 by the end of 2022

Gold prices have rebounded in recent weeks as investors seek safe havens amid fears of Russia’s invasion of Ukraine, but in the longer term, UBS investment bank Johnny Tevis predicts the recent strength in gold prices will be “short-term”.

I spoke to CNBC on Monday, in front of the Russian President Russian President Vladimir Putin Command of troops in two separate regions in eastern UkraineAfter he announced that the Kremlin would recognize their independence.

instant gold It recently crossed the $1,900 level, having recently settled at $1,908.13 an ounce in the morning of the Asian trading hours on Tuesday. This is sharply above the levels around $1800 in early February.

The latest escalation in Ukraine has raised doubts about the possibility of a diplomatic solution to the ongoing crisis. US President Joe Biden since then I ordered the imposition of sanctions on the separatist regions of UkraineThe European Union has also pledged to take additional measures.

Gold is traditionally seen as a safe investment in times of uncertainty.

Looking ahead, Teves said the gold market is expected to return to focusing on macro drivers such as real prices in the US. Federal Reserve policy as well as growth prospects. In fact, UBS sees gold prices dropping to $1,600 an ounce by the end of 2022.

“The environment in which real rates are rising and the Fed’s tightening policy provides a negative backdrop for gold,” she said. “We believe that the force must eventually … be short-lived.”

As we approach the end of the current quarter, the Federal Reserve It is widely expected to raise interest rates at its March meeting To calm inflationary pressures, Teeves said that is likely to put pressure on gold.

Expectations of higher interest rates tend to push the yields of assets such as US Treasuries higher, which could reduce the attractiveness of non-yielding assets such as gold.

However, she acknowledged that the upside risks for gold are rising.

“I think the main risk here is if we start to see reallocation in gold, with the expectation that even though real prices are up, they are likely to remain in negative territory, so gold reallocation remains attractive,” the strategist said.

Moreover, allocations to gold could begin to rebuild as investors grow increasingly concerned about slowing economic growth as the Federal Reserve tightens policy, she said.