Swiss bank UBP buying gold again, forecasting $6,000 year-end

Union Bancaire Privée is buying gold again after cutting a significant position in response to an Iran war-induced slump, saying it believes the long-term outlook remains intact.

The Swiss private bank is gradually adding bullion to discretionary client portfolios after cutting exposure to 3% from around 10%. The metal has tumbled since the war began due to fears of higher interest rates, and a liquidity squeeze that saw traders offload holdings to cover losses elsewhere.

“We have taken the first steps to rebuild” gold portfolios after the flush-out of “one-sided positions,” Head of Discretionary Portfolio Management in Asia Paras Gupta said in an interview. The bullion positions of institutional and retail investors are now “quite balanced,” he added. The bank managed around CHF184.5 billion ($233 billion) of client asset as of last year.

UBP is looking to further rebuild its gold positions, consisting mostly of bullion-backed exchange-traded funds, after they recovered to around 6% of discretionary portfolios. Gupta said the bank still sees prices rising to $6,000 an ounce by the end of the year as structural demand — including central bank buying, concerns about fiscal deficits and geopolitical tensions, remain intact.

Gold fell on Monday after US-Iran peace talks ended without resolution and the US said it would blockade the Strait of Hormuz. Bullion has fallen by around a 10th since the war began as investors focus on inflationary risks as energy prices surge.

“The risk of inflation is coming in more immediately,” Gupta said. This could weigh on gold in the short term, but the macro forecast does not point toward recession, he added.

UBP’s view echoes a slew of investment banks that have recently affirmed bullion’s longer-term outlook despite the recent downturn. ANZ Banking Group Ltd. and Goldman Sachs Group Inc. have projected gold prices to go higher.

Dip-buyers have recently stepped in to help bullion claw back some losses. Global holdings by gold-backed ETFs increased by around 20 tons in April following the biggest monthly outflows in five years in March, according to a Bloomberg tally.

Additional buying “requires a lot more clarity in terms of how geopolitical events are playing out. We currently don’t have that,” Gupta said. “The events over the weekend only reinforce the need for more clarity.”

(By Yihui Xie)