Gold has been hurt by the election of Donald Trump as U.S. President. However Swiss bank UBS urges investors to keep their nerves.
The UBS head of commodities, Dominic Schnider, expects the price for an ounce of gold to rise to $1,300 from a current $1,230. Part of the reason behind the expected increase in the gold price is a bet against the policies of Donald Trump, the banker told U.S. television channel «CNBC».
Election Shock
Gold investors are still reeling from the shock of the U.S. elections of November 6, 2016. Gold plunged in the aftermath after the election of the inexperienced Trump, while other investment products appreciated.
Still, gold has recovered and is up 7 percent since the beginning of the year. And UBS believes the rally will continue.
Increased Uncertainties
The main reason for the expected increase is uncertainty, according to Schnider. Analysts are waiting to see how quickly the U.S. Federal Reserve will raise interest rates. The central bank announced it will do so in three steps, triggering a monetary policy debate in the world's largest economy.
Schnider expects the Fed to lag the rate of inflation, which he said is good for the price of gold. The banker is also questioning Trump's promised infrastructure investment boost as any such program would first have to be approved by the U.S. Congress.
What If?
The gold price will profit if the promised injection of money into the crumbling infrastructure remains elusive and the economy grows more slowly than expected, Schnider said.
