UBS Wealth Recommends Buying Gold Near $1,200 for Insurance

Bloomberg/Ranjeetha Pakiam/07-04-17

Gold will probably trade in a range of $1,200 to $1,300 an ounce in the short-term as the metal tracks U.S. real interest rates, according to UBS Group AG’s wealth management unit.
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“We’re not saying we have a bullish bias; we’re not saying we have a bearish bias,” Wayne Gordon, executive director for commodities and foreign exchange, said in an interview on Tuesday. “We’re saying that tactically, people should be buying it somewhere near $1,200 and selling it again somewhere near $1,300, and it’s because we have a view that real rates go sideways. So the pickup in nominal rates will be equally matched by the pickup in inflation.”

…Gold could also act as insurance if the labor market doesn’t show further improvement in the U.S. and inflation doesn’t pick up, which would make the Fed pause on its tightening path, or if global growth slows, said Gordon. “We like the insurance qualities for gold just from an unknown perspective at these sorts of levels,” Gordon said.

PG View: That second paragraph is a little confusing in the insurance context. Nobody really “trades” their insurance; or they certainly shouldn’t. If the value of the insurance is going up, it likely means that the risk is going up. Like auto, homeowners and life insurance, you buy it and then hope you don’t have to use it.