Gold Futures Soar 19.63% in Q1, Wall Street Targets $3,500

Gold prices have surged in the first quarter of this year, with New York gold futures rising by 19.63% over three months, repeatedly breaking historical highs. This strong performance has led some on Wall Street to raise their target prices for gold this year, with McGregor Group being the most optimistic, predicting that gold could reach a new high of $3,500 per ounce in the third quarter.

However, analysts at UBS have expressed skepticism about the likelihood of gold prices reaching $3,500 this year, maintaining their forecast of $3,200. On Tuesday, gold prices peaked at $3,170, indicating that the target price set by UBS is within reach. This cautious outlook from UBS comes despite the recent surge in gold prices, which have shown significant strength in the first quarter of the year. The analysts' perspective suggests that while gold prices have made substantial gains, there are factors that could limit further upward movement.

UBS notes that overall, the inflow of funds into gold ETFs, combined with central banks' continued purchases of gold and strong retail demand for gold products, can be seen as a general upward force in the gold market. This is also the reason why UBS is bullish on gold and will continue to invest in it. However, for gold to rise to $3,500 per ounce, it still needs a stronger catalyst, such as U.S. tariff risks or geopolitical risks escalating to a level that has a negative impact on the U.S. and global economies.

In the first quarter of this year, the inflow of funds into gold ETFs increased significantly, with an estimated scale of 130-150 tons, in stark contrast to the 114 tons outflow in the same period last year. This resurgence in interest in gold ETFs is attributed to several factors, including increased trade and economic uncertainty, the possibility of stagflation, recession risks, and geopolitical tensions. These factors have enhanced gold's reputation as a hedge against extreme risks.

However, Sunil Krishnan, multi-asset manager at Aviva Investors, points out that given the significant rise in gold prices, it has become more challenging for investors to increase their gold allocations at this point. UBS analysts suggest that, from a long-term perspective, investors can allocate 5% of their funds to gold in a dollar-balanced portfolio to achieve the best diversification. UBS also notes that the rise in gold prices is not just a result of panic buying but also a sign of investors adjusting their mindset, indicating that people need to accept the existence of uncertainty for a considerable period.