UBS strategist Joni Teves warned that a Federal Reserve rate hike this month could trigger a short-term drop in gold, though the bank expects the pullback to stay contained. A Fed hold, she said, would likely push the metal higher instead. Central-bank buying, including sizable Chinese purchases, continues to support the longer-term outlook.
UBS warned this week that a Federal Reserve rate hike this month could trigger a short-term drop in gold prices, though it expects any decline to stay contained. Strategist Joni Teves told investors that gold's resilience after the recent employment report doesn't mean rates no longer matter — rather, the market has already absorbed a large tightening in expectations.
A hike would hit gold first, then fade
If the Fed raises rates, Teves said the first move in gold is likely lower as real rates and the dollar respond. But she added that seasonal physical demand and buying by institutional and official-sector investors at lower prices should limit the fall.
A hold could send gold higher
Under a no-hike outcome, Teves said investors would likely chase the metal higher, particularly if the decision revived questions around Fed independence. Risks are two-sided but skewed to the upside, she said: "a hold would likely deliver a stronger upside response" (according to Teves).
Central-bank buying stays intact
Central-bank buying remains intact regardless of whether the Fed delivers a rate hike this month. Teves said China added about 20 tonnes of gold in August, bringing its purchases to roughly 80 tonnes this year — the strongest run since late 2023.
UBS also pointed to gradually rebuilding gold ETFs, improving Chinese trading activity and approaching seasonal demand in India as supportive factors, leaving the risk-reward into year-end skewed higher.
Source: Investing.com
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