Julius Baer Upgrades Commodities Outlook Amid Rising Gold and Silver Futures

With another day of gains in gold and silver futures, Swiss group Julius Baer has revised its outlook on commodities to constructive. The group now sees potential for further increases in both metals, as highlighted in a note sent to clients and the market on Friday morning.

Positive Shift in Commodities Outlook

Julius Baer attributes this optimistic shift to the continued influence of U.S. monetary policy and the significant role of the Asian market in the gold sector. "We have to recognize that the region's willingness to pay for gold as a hedge against economic and geopolitical risks appears even greater than we expected," stated Carsten Menke, head of next-generation research at Julius Baer.

Impact of U.S. Monetary Policy

Weaker-than-expected U.S. economic data have revived hopes for interest rate cuts by the Federal Reserve (Fed), boosting both gold and silver prices. This development could incentivize Western safe-haven seekers to re-enter the market, added Menke.

Central Bank Purchases Driving Demand

Central banks have increasingly bought gold for geopolitical reasons rather than purely economic ones. For instance, the People's Bank of China has been keen on reducing its dependence on the U.S. dollar to avoid potential sanctions. Julius Baer estimates that the People's Bank of China has been responsible for at least 30% to 50% of all central bank gold purchases over the past two years.

While the Chinese central bank shows price sensitivity, "its willingness to pay has increased as gold prices rise," notes Julius Baer. It is expected that other monetary authorities will follow suit, moving away from the U.S. dollar.

Conclusion

Julius Baer's upgrade of its commodities outlook reflects growing confidence in the potential for gold and silver price increases. As U.S. economic data influences Federal Reserve policies and central banks continue to buy gold for geopolitical reasons, the demand for these precious metals is poised to rise.

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