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Investing.com - XAU/USD prices broke above the $4,000 per ounce mark for the first time on Wednesday, extending the precious metal’s year-to-date rally to more than 50%.
UBS Chief Investment Officer Mark Haefele recommends investors maintain a "mid-single-digit percentage allocation to gold," citing its proven value as a strategic diversifier and hedge against inflation and uncertainty.
The research firm suggests the rally has room to continue despite the rapid price appreciation seen this year and UBS expects prices to reach $4,200 per ounce in the coming months.
The ongoing U.S. government shutdown has injected fresh momentum into gold’s upward trajectory, according to market analysts. Political leadership changes in Japan and France have sparked fiscal concerns that further support the metal’s appeal as a safe-haven asset.
Falling U.S. real interest rates have reduced the opportunity cost of holding non-yielding assets like gold, reaching their lowest levels since mid-2022. This decline reflects market expectations for additional Federal Reserve rate cuts while inflation remains above the central bank’s 2% target.
Demand for gold remains robust across multiple sectors, with exchange-traded fund holdings approaching record levels and central bank purchases expected to reach 900-950 metric tons this year.
Julius Baer said earlier that it sees central bank buying lasting up to five years.
"Assuming a target gold allocation of 20% to 25%, in line with the global average, buying should continue for another three to five years according to our analysis,” said Carsten Menke, Head of Next Generation Research at Julius Baer.