Gold slips but UBS, Goldman analysts predict continued upward rally (NYSEARCA:GLD)

Gold futures edged lower for the second straight session on Tuesday but still remain close to record highs reached on August 29.

The U.S. dollar index climbed 0.2% to a two-week high, making gold more expensive for other currency holders, with traders turning their focus to Friday’s U.S. payrolls report along with ISM surveys, JOLTS job openings and the ADP employment report due later this week.

“If the U.S. jobs report is significantly weaker, speculation about a U.S. recession and faster rate cuts will resurface, further supporting gold,” Commerzbank said, according to Reuters.

Front-month Comex gold (XAUUSD:CUR) for September delivery settled -0.1% to $2,489.90/oz, its lowest closing value since August 22, while front-month Comex September silver (XAGUSD:CUR) finished -2.7% to $27.951/oz, its lowest settlement value since August 14.

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Gold has gained more than 20% YTD, and the uptrend still has legs, with further gains likely over the next couple of years, UBS precious metals strategist Joni Teves wrote, according to Dow Jones.

Strong central bank buying and resilient physical demand imply structural support, while elevated macroeconomic uncertainty and persistent geopolitical risks should drive a rise in investors’ gold allocations, which are still low, Teves said.

Consumer demand has proven mostly resilient over time, and while gold imports and jewelry demand face headwinds from higher prices, underlying interest remains strong, Teves wrote.

Goldman Sachs said gold remains its “preferred hedge” against geopolitical and financial risks, opening a long gold trade recommendation.

Gold has the highest potential for a near-term price increase, given its favored hedge role, while weak demand from China has resulted in a “more selective, less optimistic” outlook on other commodities, the bank said.

“Imminent Fed rate cuts are poised to bring Western capital back into the gold market, a component largely absent of the sharp gold rally observed in the last two years,” Goldman wrote.

Also, Bank of America raised stock price targets for Barrick Gold (GOLD), IAMGOLD (IAG) and Wheaton Precious Metals (WPM) on the back of the companies’ strong Q2 results as well as the bank’s bullish gold price view.