Gold (GC=F) hit a record high this week, bringing the precious metal’s gains to more than 25% so far this year.
Wall Street analysts believe gold has room to rise as investors seek safety amid growing fears of a recession and an ongoing trade war.
“A modest allocation to gold has proven to help mitigate trade uncertainty,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said Thursday.
“Despite the strong gains in gold prices, we believe it can rise further, with our base case for gold prices to reach $3,500 an ounce this year.”
Gold closed at $3,341 an ounce on Thursday, as the holiday approached.
Gold prices have surged 40% over the past year as central bank demand for gold hit an all-time high and investors piled into physical gold ETFs. A weaker dollar (DX-Y.NYB) has also boosted demand for gold.
Gold’s gains have also been persistent, with only a pullback from investors waiting to buy at a lower price.
Goldman Sachs analysts noted in a note Thursday that the 5% drop in stocks earlier this month was largely due to margin call liquidations and a sell-off in equities following President Trump’s tariff announcement on April 2. That sell-off was quickly bought up, sending prices back to record levels.
Lina Thomas and her team at Goldman Sachs still believe gold is at an attractive entry point, calling the rally “structurally supported and less exposed to near-term sharp liquidation risk.”
The firm noted that the biggest gains in gold this month have been driven by official sector buyers in Asia, such as the People’s Bank of China.
“As such, despite recent volatility in gold prices, we view current levels as a tactically attractive entry point and see this as increasing upside risk to our year-end $3,700/oz troy ounce price forecast.”
If a recession were to occur, the analysts predict ETF inflows could accelerate further, pushing gold prices to $3,880 per troy ounce by year-end.
Still, the recent stock market selloff has given some market watchers pause, saying retail investors may want to wait a while before buying precious metals.
“If we are in the early stages of what could be multiple margin calls, given the volatility we’ve seen in the stock market, it’s only a matter of time before gold becomes a source of liquidity to meet those margin calls,” Michael Gayed, publisher of the Lead-Lag Report, said in an interview with Yahoo Finance Live on Thursday.
“I don’t think gold is in a bear market yet, but if you want to take a strategy at the right time, you may want to wait.”
