Gold bull market may just be getting started: UBS

Published Thu, Jul 7 20166:48 AM EDTUpdated Thu, Jul 7 20166:48 AM EDT

The gold bull market may be just beginning, UBS told clients on Wednesday, listing a plethora of reasons for them to buy the shiny metal. "An environment of low and negative rates narrows the gap between holding gold vs other assets, making having gold in a portfolio an attractive proposition amid heightened global macro uncertainty," UBS strategist Joni Teves wrote in a research note. The investment bank predicts the precious metal could trade as high as $1,400 in the short term, or about 2 percent from where futures were trading Wednesday. UBS raised its 2017, 2018 and 2019 gold price forecasts to $1,400, $1,450 and $1,475, respectively. "Gold has likely entered the early stages of the next bull run," Teves said, explaining that a combination of macro factors along with robust interest from investors means the recent upside momentum has "more endurance and stability." Source: FactSet Among the key drivers for gold, Teves points to a low or negative interest rate environment, the strength in the U.S. dollar and "lingering" macro-economic risks — all of which should lead money managers and retail investors to increase their positions in safe-haven assets. "Gold's performance has been driven by very broad-based participation in gold as a portfolio diversifier and hedge. Our sense is that individual positions are not particularly large, but rather the extent of involvement has been quite expansive," Teves said. After three consecutive years of declines, gold is up 29 percent in 2016, and trades at a two-year high. As gold moves up, the strategist believes the market will likely "acclimatize to higher levels of positioning along with higher prices," in essence raising the floor and setting the ground for additional upside. ETF inflows show this trend as they remain "strong and resilient," Teves added. Source: UBS At the current levels, gold prices are 28 percent below their record close of $1,900 set on Aug. 2011. For investors looking to get exposure to gold, market watchers recommend the SPDR Gold Trust . For those more risk averse, they point to the VanEck Vectors Gold Miners ; although they said investors should wait for a pullback since the ETF is already up more than 115 percent this year. On Thursday, UBS upgraded its outlook for silver and platinum . Teves now sees silver prices averaging $16.8 per ounce this year and $18.3 in 2017, up from $16.1 and $17.5 respectively. "Silver is poised to take advantage of its strong positive correlation with gold. However, given silver's high volatility and direct links to industrial and economic activity, it is unlikely to be viewed as a strategic asset to hold in a highly uncertain macro environment," she said in a report. Teves now forecasts platinum will average $995 in 2016 and $1,100 next year. —With contribution from CNBC's Katy Barnato .

Several gold bars being held.

Akos Stiller | Bloomberg | Getty Images

The gold bull market may be just beginning, UBS told clients on Wednesday, listing a plethora of reasons for them to buy the shiny metal.

"An environment of low and negative rates narrows the gap between holding gold vs other assets, making having gold in a portfolio an attractive proposition amid heightened global macro uncertainty," UBS strategist Joni Teves wrote in a research note.

The investment bank predicts the precious metal could trade as high as $1,400 in the short term, or about 2 percent from where futures were trading Wednesday. UBS raised its 2017, 2018 and 2019 gold price forecasts to $1,400, $1,450 and $1,475, respectively.