UBS Says 'Positive' on Gold, May Rise to $2,500

What do you make of terms of the Chinese demand picture for commodities this year now? Well, I think in general you need to separate what happened on the property side, iron ore, which is clearly on the soft side, that’s why prices on the bulks have come down quite a fair bit and we maybe still need to find a floor. But there has been another side. I mean manufacturing has been strong. You can argue, OK, what we have seen in March, a little bit of a disappointment. But in general, Chinese, everything related to manufacturing has been robust. Look at copper for example. I mean without Chinese demand last year, we would have been completely different place. So I think people need to separate and look a little bit into the detail below the surface. And I think the interesting part is here that commodity so far has held up pretty well and versus equity for example, the correlation has a little bit broken down. We’re close to 0. And I think that gives it some allure because there’s something else there, not just a broad macro picture. Then there’s the hedge in the safe haven, the aspect of gold and perhaps even silver. What’s your outlook there? No, absolutely. I think look on gold, we’re positive looking at $2500 an ounce. Clearly, that’s not really far where it is versus forward, but I think particularly silver has a little bit of ketchup. We’re looking at thinking heading toward $32 an ounce. And I think the narrative is quite clear. While you know there’s maybe still a little bit pricing out of rate card on the Fed side at one point that narrative can shift and we still look at the manufacturing covering both come together, silver can definitely rally a fair bit. So quite bullish on that one as well. And then the overall complex with oil we which we’re basically we’re getting paid to wait which given the forward curve makes the overall asset class quite attractive. Can you tell us why, what’s driving gold to to, you know, touching 2400 at one point, what, what do you think is the ultimate driver if it’s not, if it’s not the dollar, if it’s not the Fed pricing and what is it that’s really driving the most? No, I think there’s been a combination of drivers. I think what we try to understand why it didn’t happen with a little bit of inflation expectation coming up. So you look at break evens changing over the last six months and you look at how gold moved. That explains it quite nicely. Maybe not the magnitude, but it gives you a little bit of a hint why people were looking at gold. But the underlying issue is deficits. Then we do have the, the challenge in the China, so China’s demand is strong, central bank buying and then geopolitics, you load up all the four, why would you not have something like gold in your portfolio? So I think it’s a, it’s a combination of factors, what does it need to rally from here and I think that’s the most important thing. We need ETF buying. I haven’t seen that yet. That should come at some point when the Fed obviously starts to cut. I think then we have that additional oomph to do the next like higher you talked about copper just a few minutes ago and the some of the other industrial metals whether it’s nickel and zinc and the like. I’ve we’ve been trying to ask the same question about how does one invest in new productive forces the the, the big shift that Xi Jinping has been pushing in China towards high end manufacturing. Where do you can an investor leverage on those particular industrial metals if it’s going into or E VS into batteries, solar and the like? Well, I do think copper is clearly the stand out here because it has a supply challenge at this point in time, we barely going to grow mine supply and without copper no energy transition. I think that needs to be clear. But we also need to be a little bit more nuanced. For example, nickel even though went up lately, there’s so much supply, almost 10% supply growth, though as an investor have a little bit of a nuanced approach, but copper would be my go to metal to think about 10,500 our target.