UBS says inflation will remain sticky for the foreseeable future
- rising prices to be a persistent problem over the next decade
UBS forecast US inflation to hit 3% at the end of 2024, 2.6% at the end of 2025, and 2.5% throughout 2027. All well above the Fed's 2% target.
The background to the UBS gold forecast (to US $ 2900 by end 2025):
- sticky inflation, the Fed might have hit a roadblock in the fight against inflation
- megatrends of increased deficits, deglobalization, and decarbonization as drivers of elevated inflation for the next decade
- Trump's protectionist policies like tariffs and other trade restrictions are likely to result in higher costs for consumers and businesses, slower worldwide economic growth, and, ultimately, increased inflation
- increased regulatory pressure worldwide for a green energy transition. Limited natural resources, environmental taxes, insurance costs, and legal restrictions will create an environment with higher energy costs, which can fuel price gains throughout the economy.
UBS recommends exposure to gold:
- hedge against geopolitical risks, growing national debt, and policy changes
- to $2,900 an ounce by the end of 2025
- trend of growing US national debt, increased demand from central banks globally, falling interest rates
