Investing.com -- The price of gold is seen driving higher over the next 6 to 12 months thanks to declining interest rates and "strong" central bank purchases of the yellow metal, according to analysts at UBS.
Gold prices hit a record high in Asian trade on Friday, extending a multi-year drive higher that has been bolstered by safe haven demand.
Spot gold rose 0.4% to a record high of $2,706 per troy ounce, while gold futures expiring in December rose 0.5% to $2,720.15 an ounce.
In a note to clients, the UBS analysts argued that demand for gold should stay elevated as central banks and other financial institutions are "likely [...] to add further to gold reserves" -- albeit at a more tepid pace than in the first half of 2024 -- in a bid to diversify their holdings and offset various potential risks.
These purchases, along with an anticipated move by the Federal Reserve to pivot into a cycle of policy easing, are tipped to put gold prices at $2,900 per ounce by September 2025, the analysts said. The relationship between rates and gold has historically been inverse, with a dip in rates typically pushing up gold prices.
The Fed reduced rates by an outsized 50 basis points in September. Markets have priced in additional cuts at upcoming Fed meetings, although data earlier this week showing higher-than-anticipated retail sales and a drop in weekly jobless claims fueled wagers that the rate-cutting may be at a slower pace than initially expected.
Such a prospect threatened to dent gold prices. However, it has still derived some support from the Fed's global counterparts, most recently the European Central Bank, which rolled out its first back-to-back rate cuts in 13 years on Thursday.
Meanwhile, a closely-contested US presidential election, economic uncertainty and geopolitical tensions are projected to boost gold prices in the coming weeks, the analysts added.