By mid-year, bullion may rise 25%, silver, on the other hand, is likely to remain volatile in the backdrop of the sharp run seen in the last few months and the ensuing correction seen recently.
Key Points
- It is too early to build long-term exposure to silver
- Gold prices saw a 31% dip in the international markets on January 30
- Gold bull markets typically don't conclude
The bull-market in gold is not yet over and prices can rise to $6,200 an ounce (oz) by mid-2026, up nearly 25 per cent from current levels, according to UBS.
"While we anticipate consolidation between $4,500 and 4,800/oz in the coming days due to volatility from margin calls, we believe gold will rise thereafter toward our mid-year forecast of $6,200 and continue to rate it as an attractive hedge," UBS analysts wrote in a note.
How the white metal will fare
Silver, on the other hand, is likely to remain volatile in the backdrop of the sharp run seen in the last few months and the ensuing correction seen recently, they said.
On Thursday, silver prices crashed over 7 per cent to $77/oz in the international markets.
On the MCX, the white metal traded at around Rs 244,000 per kilogram, down over 21 per cent in a week.
It is too early to build long-term exposure to silver.
What investors should do
While we maintain our forecasts, we think investors should carefully consider the return required for an asset that has recently exhibited volatility.
A further pullback is needed before turning constructive on the metal from a risk-reward perspective, UBS said.
Gold prices saw a 31 per cent dip in the international markets on January 30, a day after hitting a record high level.
The drop marked the most substantial one-day fall in 13 years.
Multiple factors contributed to the sell-off, UBS said, including investor profit-taking after recent gains, reduced liquidity in futures markets, and emerging risks associated with interest rates and the strength of the US dollar.
Concerns regarding interest rates, too, intensified after US President Donald Trump nominated Kevin Warsh — an advocate for strict monetary policy, restrained growth of the Federal Reserve’s balance sheet, and institutional reform — as Fed chair, UBS said.
Bull markets
Gold prices slipped not because long-term holders suddenly changed their views, but because leveraged holders had to exit, said Nigel Green, chief executive officer (CEO) of deVere Group, a global consulting firm that has $14 billion assets under management.
"This phase tends to be self-limiting.
"Once leverage is flushed out, selling pressure eases naturally.
"Traders who were forced sellers are no longer present, daily price swings narrow, and liquidity improves.
"The recovery may not be immediate or dramatic, but, we believe, the mechanics favour a bounce rather than continued freefall once the forced phase ends," he said.
UBS concurred. Gold bull markets typically don't conclude simply because fears diminish or prices become too high.
They end when central banks establish their credibility and pivot to a new monetary policy regime, according to the brokerage.
"Since Warsh hasn't demonstrated the same credibility as Volker, we don't believe this is the end of gold’s bull market," it said.
What brokerages say about gold
The brokerage estimated that prices of the yellow metal are currently in the mid-to-late stage of the present bull market, moving from a consistent upward trajectory to one reaching new peaks, but with intermittent drawdowns of 5-8 per cent.
“Importantly, the typical factors historically associated with the conclusion of gold’s bull market — sustained elevated real interest rates, a structurally stronger US dollar, improved geopolitical conditions, and fully re-established central bank credibility — have not yet materialised," the brokerage said.
The initial market response to Kevin Warsh’s nomination has generally been viewed as hawkish, particularly regarding his approach to the Fed’s balance sheet.
This sentiment has manifested in lower gold and bitcoin prices, alongside a modest appreciation of the US dollar, it said.
“However, Warsh’s historical record and evolving policy perspectives suggest a more complex outlook.
"As such, we believe a significant shift away from accommodative monetary policy — such as a Volcker-style tightening — is unlikely,” UBS said.
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