Diversification benefits of Oil and Gold remain intact – UBS
|Investors face fresh uncertainties. Heightened geopolitical risks underline the merits of diversification, economists at UBS report.
Oil and Gold assets will also be supported by market fundamentals
Gold closed at a one-month high of $1,981 an ounce on 20 October, and is up around 8.7% over the past two weeks. Brent rose 1.4% last week to $92.16, following a gain in the prior week of 7.5%, reflecting concern that a broader Middle East conflict could disrupt Oil supplies.
In the case of Oil, the risk that the Middle East conflict could interrupt supplies comes at a time when the global market is already tight. Global demand is continuing to rise, while OPEC+ Oil exporters have been disciplined in constraining supplies.
Gold, meanwhile, should benefit from the eventual turn in the Fed’s cycle, which lowers the opportunity cost of holding non-interest-bearing assets like Gold.
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