Gold prices could surge, potentially leading to a continued decrease in the value of the US dollar.
Spotlight: The US dollar is projected to keep plummeting against major currencies like the pound, as per UBS analysts' predictions, with gold expected to surge back to record highs.
The DXY index, measuring the dollar's performance against a basket of currencies, saw a significant drop at the start of April following the announcement of Donald Trump's punishing tariffs.
Since the beginning of 2025, sterling has been relentlessly climbing against the dollar, rising from $1.24 to $1.34 — a significant seven percent increase. After a short stabilization period in the second half of the month, the dollar has been on a wobbly footing amid Trump's trade negotiations.
UBS analysts anticipate this downward trend to persist in the short term, as fears over the possible dismissal of Federal Reserve chair Jerome Powell subside and Trump retreats from some of his aggressive trade tax policies. According to Mark Haefele, global wealth management CIO at UBS, the labor market shows resilience, but any weakening would be gradual at most.
However, in the medium term, the dollar's slide is expected to resume due to factors such as the US's towering debt-to-GDP ratio (123%) and deteriorating economic sentiments.
Investors are increasingly abandoning the greenback, losing faith in its traditional "safe haven" status due to the Trump administration's unpredictability. UBS advises investors to switch their dollar allocation away from currencies such as the Japanese yen, euro, British pound, and Australian dollar and sell the risk of a rising dollar for yield pickup.
UBS remains bullish on gold, even as it entered a flat phase in the second half of April. The precious metal managed to breach the "psychological" $3,500 barrier during the tariff turmoil but has since retreated back to $3,300. The bank attributes this to continued central bank and insurer buying, reinforcing its $3,500 price target for gold. Haefele recommends investors to maintain a five percent allocation to gold as part of a balanced and diversified portfolio. Gold remains a potent portfolio diversifier and hedge, especially in volatile markets.
- Despite the temporary stabilization of the dollar due to subsiding concerns over the potential replacement of Federal Reserve chair Jerome Powell and Trump's retreat from some trade tax policies, UBS analysts predict a resumption of its downward trend in the medium term, thanks to factors like the US's high debt-to-GDP ratio (123%) and deteriorating economic sentiments.
- Investors, thanks to the Trump administration's unpredictability, are increasingly questioning the stability of the US dollar as a "safe haven," leading them to switch their allocation away from currencies such as the Japanese yen, euro, British pound, and Australian dollar, and sell the risk of a rising dollar for yield pickup, as advised by UBS.
- Technology, although not explicitly mentioned in the context of currency markets, plays a crucial role in facilitating financial transactions, influencing trading patterns, and making fundamental analyses easier and faster, which in turn impacts the economy and the value of currencies.
- Gold is projected to return to record highs, as the US dollar continues to plummet against major currencies. UBS attributes this to continued central bank and insurer buying and remains bullish on the precious metal, reiterating its $3,500 price target for gold and recommending investors maintain a five percent allocation to gold as part of a balanced and diversified portfolio.
- As gold breached the "psychological" $3,500 barrier during the tariff turmoil, it showcased the metal's potential as a potent portfolio diversifier and hedge, especially in volatile market conditions like those caused by trade negotiations and uncertain economic forecasts.
