UBS and other banks expect gold to fall to $1,600

Barrick Gold

Over the weekend, Russian forces recognized the independence of multiple rebel-controlled areas of Ukraine. In response, Tuesday’s early markets were already reeling following the news. Considering everything that’s going on in the world right now, especially with Ukraine and Russia, you’d expect safe-haven assets to skyrocket, which they have in recent days. However, some of America’s top experts actually expect safe-haven assets, especially gold, to fall in value in the mid-to-long term.

Gold prices have recently crossed over $1,900 in recent weeks, thanks to a combination of geopolitical fears in Ukraine as well as other worries like record-high inflation numbers. However, not everyone believes that this jump in gold price is going to last.

Speaking in a CNBC interview, UBS Investment Bank analyst Joni Teves said that this recent gold jump would prove to be short-lived. She said the global market is expected to revert back to big macro issues, like interest rates rather than doom and gloom news. She went on to predict gold could end 2022 down to $1,600 per ounce, if not lower.

An environment where real rates are rising and the Fed is tightening policy does provide a negative backdrop for gold. We do think that the strength should ultimately be short-lived,” said Teves in the interview, although she admitted there are some cases where gold could stay strong. “I think the key risk here is if we start to see reallocation into gold, with the expectation that although real rates are moving higher they are likely to remain in negative territory, and therefore an allocation to gold remains attractive.”

Teves wasn’t the only analyst to make a similar prediction on Monday. Capital Economics’ Oliver Allen remarked that he also thinks prices could settle to around $1,600 per ounce. He wrote that inflation concerns might ease up as the year settles, and the inflation concerns alone aren’t enough to push gold prices much higher than current levels.

Gold prices are already trading around record highs, although still shy of the $1,970 all-time record seen back in 2020. Long-time gold bulls still ardently believe that prices will rise above $2,000, especially given what’s going on right now in the markets. Bearishness in the markets has hit a high not seen since the early days of the coronavirus pandemic, although for different reasons this time.

Other precious metals have fared similarly well. This includes silver, but even platinum and palladium have skyrocketed, although the latter have surged partially due to their role in the EV and battery markets. Industrial metals like copper and iron have also been trading around all-time highs as well, as manufacturing and other economic activity picks up in Asia.

Most mining experts consider this to be the start of a new boom market for the industry. Large-cap miners have done remarkably well over this past quarter, with profit margins larger than any point in recent memory. Even if prices for metals stay at this current level, most mining shareholders would be happy with the current margins senior miners are generating. Even junior miners are benefiting, with exploration and drilling activity worldwide seeing a marked increase thanks to these higher ore prices.