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Amid the coronavirus pandemic, gold prices surged significantly this year. This precious metal can be a good choice during periods of instability.
UBS Wealth Management has advised investors to buy gold now. The firm told CNBC that gold acts as a “very good hedge” against upcoming risky events like the U.S. election and post-pandemic crisis.
On Tuesday, UBS regional chief investment officer Kelvin Tay said:
“We like gold, because we think that gold is likely to actually hit about $2,000 per ounce by the end of the year.”
For the first time in history, gold prices reached year-time highs when it shot and surpassed the $2,000 per ounce mark in August. However, on Tuesday afternoon, the prices had dipped once more, and it was trading $1,880 per ounce. Such recent weaknesses, like the dipping of prices, serve entry points for willing investors.
To Buy Gold Can Be a Good Idea during Covid-19 Period
He continued to reveal to CNBC’s “Squawk Box” that gold is currently a very good hedge, especially in the current uncertainties that the U.S. election and the Covid-19 pandemic presents.
Tay also pointed out that the low-interest-rate environment makes this precious metal is also attractive. The opportunity cost of holding gold would be quite low if the interest rates remain low as the Fed predicts. Meaning, since gold is a non-yielding asset, investors would not forgo high interest that yielding assets would otherwise earn.
Amid the coronavirus pandemic, gold prices surged significantly this year. The precious metal has so far been a widespread trade — since February when there were high unemployment levels — for investors seeking to hedge against market volatility as the U.S. economy continues in a recession mode.
According to Mark Haefele, UBS chief investment officer, Federal Reserve’s economic recovery support pledging to retain interest rates near zero until 2023 — would make gold to continue to rally.
U.S. Election Threatens Market Stability
Escalating volatility around the looming U.S. election, which man of the most successful Wall Street firms have kept on warning for many months, is another reason investors should think about gold. For months, Investors have been debating on what is better for the markets and extensively for the U.S. economy? A Trump or Biden White House. Wall Street views Trump as a pro-business candidate while Biden as a pro-corporate taxes candidate. Trump’s volatile past relationship with China has tumbled markets, but a Biden presidency would hopefully ensure increased stability on both the immigration and trade fronts.
Moody’s Analytics recent analysis of both candidates’ economic proposals revealed that a Democratic sweep resulting from a Joe Biden victory would cause the biggest economic growth and employment rebound in the U.S. Mark Zandi, Moody’s chief economist, concluded that “Biden’s economic proposals would result in a stronger U.S. economy than Trump’s.”
Riding out Uncertainty
NextEra Energy Inc (NYSE: NEE), Electronic Arts Inc (BVMF: EAIN34), Nvidia Corporation (NASDAQ: NVDA), Apple Inc (NASDAQ: AAPL), and Morgan Stanley (NYSE: MS) are a couple of stocks UBS identified that investors should ride on during the anticipated remaining 2020 high stock market volatility.
All-in-all, an investor needs sound financial market knowledge and understanding to capitalize on the value it possesses.