UBS' global wealth management unit sees gold falling to $1,800 this year
The firm says that while gold may still be supported by low US real rates and a depreciating dollar to $1,950 in Q1 2021, prices may start to come under pressure closer to mid-year before weakening to $1,800 by year-end.
The latter backdrop comes as the firm expects macroeconomic conditions to improve and the Fed signaling that it will gradually taper its bond-buying pace.
Diving deeper into precious metals, the firm argues that silver, platinum and palladium should outperform gold this year on the back of higher industrial use. At the peak, they see silver prices reaching $30, platinum $1,250, palladium $2,900 this year.
The first-half of the story is one most people would be able to get on board with, but the latter backdrop is extremely dependent on how things play out with the Fed.
I'm not saying it may not happen but it is a consideration depending on how the US economy performs and if the vaccine rollout matches the timeline optimism.
Still, the Fed may caution against moving too quickly to taper and/or to adjust policy this year or next and that could still provide a further tailwind for gold later in the year.
Looking elsewhere, the Fed taper doesn't just affect gold prices but it will also impact the equities euphoria and dollar decline narrative as well.