Gold Prices Face Near-Term Headwinds Amid Fed Rate Hike
UBS analysts expect gold to face near-term headwinds following the Federal Reserve's rate decision, but remain optimistic about its long-term prospects. The bank sees a hawkish tone from the Fed as a temporary setback for gold prices, which are currently being dragged down by elevated US real yields and a stronger dollar.
Giovanni Staunovo, an UBS strategist, pointed out that the rate hike was widely anticipated and does not invalidate gold's longer-term investment case. He cited rising global debt levels, a weakening US dollar over time, and potential Fed rate cuts next year as factors supporting investor demand for gold.
Central bank buying remains a crucial driver of gold prices, with China's People's Bank adding around 20 metric tons in August, extending its 22-month buying streak. UBS expects annual central bank purchases to range between 750-1,000 metric tons, providing structural support for the metal.