UBS Pounds Table: Buy the Dips in Gold!

Buy the dips in gold!

That’s the recommendation of UBS analysts after the recent correction in the gold price.

After peaking near $4,400 an ounce, gold was hammered lower, falling to below $4,000. Since then, the price seems to have consolidated around $4,000, but volatility continues to dominate the market with significant daily price swings.

It’s important to put the recent sell-off in perspective, however. Even with the recent dip, gold is still up over 50 percent on the year and has essentially doubled since the beginning of 2024.

UBS analysts said the pullback is temporary and they still like gold in the $4,200 ounce range.

In a research note, UBS analysts said, “The much-anticipated correction has taken a breather,” noting that they don’t see any fundamental reason for the downturn.

UBS Global Wealth Management strategist Sagar Khandelwal said he sees an upside of $4,700 in the first quarter of next year due to falling real interest rates, a weaker dollar, rising government debt, and continued geopolitical uncertainty.

Khandelwal said with the Fed apparently committed to looser monetary policy, real interest rates could flip negative.

UBS emphasized that underlying demand remains strong, citing the World Gold Council’s third-quarter demand data. They say it confirmed very strong and accelerated buying by both central banks and individual investors.

Gold demand grew by 3 percent year-on-year in Q3, hitting 1,313 tonnes, the highest quarterly level in history.

Central banks alone have bought 634 tonnes of gold so far this year. UBS noted that while this is slower than last year’s pace, it is still on track to reach 900 to 950 tonnes.

Meanwhile, ETFs reported inflows of 222 tonnes of gold, while bar and coin demand surged to over 300 tonnes in Q3.

And despite higher prices, jewelry demand was also not as weak as feared.

UBS analysts aren’t the only mainstream voices recommending more gold. In a seismic shift in investment strategy that we’ve already been telling you about, Morgan Stanley CIO Michael Wilson recently recommended ditching the traditional 60/40 portfolio for a 60/20/20 ratio that allocates 20 percent to gold.

Charts and Parts Substack argued that this could lead the way to a broader institutional shift, noting that nobody likes to go first -- not in markets, not in start-ups, not in fashion. But once the ice breaks, the floodgates can open.

Meanwhile, silver has been on a wild roller coaster ride.

The question now, is the recent selloff a temporary correction or have we reached the end of the rally?

While the supply displacement that pushed silver to a new record high has moderated somewhat, the underlying dynamics that have been driving both silver and gold higher over the last two years remain in place.

Silver gained nearly 40 percent in two months. This is the definition of overbought, and a correction was inevitable. And correct it did.

After charting a new record high of $54.48 in mid-October, silver suffered the largest single-day selloff in years just 11 days later, plunging 16 percent to a low of $45.57 on October 28. Since then, silver seems to have found support in the $48 range.

It’s important to remember that even with the sharp correction, silver is still up over 65 percent this year and ranks among the best-performing assets.

Silver’s selloff corresponded with a similar correction in the gold market. Metals Focus called the correction “long overdue.” Our interview guest this week, Phillip Newman, will share more of Metals Focus’ analysis coming up here in just a moment.

If anything, silver's resilience in the wake of its $7 to $8 selloff from the highs is reason for optimism. The longer that silver moves sideways in the $45 to $50 range, the more likely it will not be heading lower. And it could just be recharging before a new rally back above $50 and beyond.

Of course, time will tell... but remember, these are volatile markets and it's never prudent to go all in on ANY investment theme, regardless of its merits.

Gold is now up about $10 or a slight 0.2% to come in at $4,026 an ounce. Silver is down slightly – off 0.4% to trade at $48.72. Platinum is off 1.1% to check in at $1,564. And finally, palladium is down 2.9% and comes in at $1,421 an ounce as of this Friday morning recording.

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