Gold's Bull Market Not Over Yet, Says UBS Strategist

Gold's bull market has further to run according to Bhanu Baweja, chief strategist at UBS Investment Bank. He attributes this trend to sovereign buying, changing portfolio behavior, and concerns over public finances. A key shift in gold's relationship with real interest rates occurred in 2022 when western governments froze Russia's foreign exchange reserves.

This event led reserve and asset managers globally to reevaluate their definition of money, ultimately leading them to increase gold allocations from 5 to 11 percent of reserves. Emerging market central banks and sovereign funds now hold more gold than ever before, with developed-market peers holding 26 percent of their reserves in the metal.

Since February 2022, US five-year real yields have risen over four percentage points, yet gold prices have defied expectations by increasing 7 percent. This asymmetry has left many fair-value models describing gold as overvalued since approximately $2,500 an ounce.