As major financial institutions raise their gold price forecasts, gold-backed tokens are poised for gains amidst continued market optimism and historic rally highs.
Major financial institutions are raising their gold price forecasts due to growing trade war fears and central bank accumulations.
Financial Institutions Raise Gold Price Forecasts
Major financial institutions like Citi and UBS have increased their gold price forecasts, anticipating the precious metal‘s bull run will continue as markets are pressured by geopolitical tensions and economic uncertainties. This week, strategists at both Citi and UBS issued higher gold price forecasts, expecting the precious metal to benefit from growing trade war fears and central bank accumulations.
Gold-Backed Cryptocurrencies Outperform
Gold-backed cryptocurrencies have been benefiting from this trend, with tokens like PAXG and XAUT seeing performance in line with that of the precious metal. These tokens, backed by physical gold stored in vaults, have outperformed the wider cryptocurrency market amid uncertainty.
A gold-backed cryptocurrency is a digital currency that has its value pegged to the price of 'gold'.
This type of cryptocurrency is designed to provide stability and reduce volatility, as its value is tied to a physical commodity.
Gold-backed cryptocurrencies work by issuing tokens or coins that represent a specific amount of gold stored in a vault.
The value of each token or coin is directly linked to the spot price of 'gold' , ensuring that the cryptocurrency's value remains stable.
This concept aims to combine the benefits of digital currencies with the stability of traditional commodities.
Citi has adjusted its short-term gold price target to $3,000 per ounce and increased its average forecast for the year to $2,900, up from $2,800, according to Investing.com. The hike is attributed to factors such as trade wars, geopolitical tensions, and global growth concerns driving demand for the precious metal.
Meanwhile, UBS has hiked its 12-month gold price target to $3,000 per ounce, surpassing its previous forecast of $2,850. The precious metal has already breached this level, currently trading at $2,860 after rising about 9% year-to-date.
UBS strategists led by Mark Haefele noted that gold‘s enduring appeal as a store of value and hedge against uncertainty has again proven itself. Citi’s note points to trade wars and geopolitical tensions reinforcing the reserve diversification/de-dollarization trend and supporting emerging market (EM) official sector gold demand.
