Title: Gold Rally Surges Over 5% in September, Defying Historical Trends – UBS Analysts
In a recent note to clients, analysts at UBS have observed a remarkable rally in gold prices, with the precious metal surging over 5% in September. This surge, described as “unseasonably strong,” goes against the historical behavior of gold during this month over the past decade.
The analysts noted that conversations with market participants indicate a growing bullish sentiment towards gold, although this sentiment has yet to be fully reflected in positions. Many investors are waiting for pullbacks to increase their exposure to gold, but the lack of opportunities has fueled sharp price increases as investors chase higher prices.
While traders are anticipating a potential cooling in gold’s returns, especially if there is a re-acceleration in US economic growth leading to a “hawkish pivot” by the Federal Reserve, the analysts believe any downside is likely to be limited. They suggest that a period of consolidation in the market would be healthy, allowing weak long positions to be flushed out and long-term investors to enter at better levels.
The recent surge in gold prices was further bolstered by a rate cut by the Federal Reserve last week, with sentiment also being supported by the prospect of further cuts later in the year. Lower interest rates are favorable for gold as they reduce the opportunity cost of investing in non-yielding assets. The dollar and Treasury yields declined after the Fed’s decision, contributing to additional gains in gold.
Overall, the current market conditions suggest a bullish outlook for gold, with potential for further price increases in the near term. Investors should closely monitor developments in the global economy and central bank policies to make informed decisions regarding their investment portfolios.