buy gold as prices weaken, says UBS Wealth Management

Gold bars being cast at a plant by Gulidov Krasnoyarsk Non-Ferrous Metals Plant in Russia.

Kirill Kukhmar | TASS | Getty Images

SINGAPORE — Investors should be putting their money in gold now, as it represents a “very good hedge” ahead of risk events such as the U.S. election, UBS Global Wealth Management told CNBC.

“We like gold, because we think that gold is likely to actually hit about $2,000 per ounce by the end of the year,” according to Kelvin Tay, the firm’s regional chief investment officer, on Tuesday.

“And gold has certain hedges to it,” Tay said. “In (the) event of uncertainty over the U.S. election and the Covid-19 pandemic, gold is a very, very good hedge. And its recent weakness represents a great entry point for investors,” he added, speaking to CNBC’s “Squawk Box.”

Gold prices have shot to record highs this year — and surpassed $2,000 per ounce for the first time in history. Recently, however, prices have dipped again and last traded at around $1,880 per ounce as of Tuesday afternoon during Asia hours.

The precious metal is also attractive due to the low interest rate environment, Tay pointed out.

If interest rates stay low as the Fed has indicated, the opportunity cost of holding gold — a non-yielding asset — will be “quite low,” he added. That’s because investors are not forgoing interest that would be otherwise earned in yielding assets.

Tay also recommended that investors put some money into Chinese government bonds as they are set to be included in major index provider FTSE Russell’s World Government Bond Index. The inclusion, from October 2021, is set to bring billions of dollars of inflows into China.

Tay pointed out that Chinese government bond yields, at 2.5%, are higher than other regions, compared to U.S. yields at 0.6% and European yields at largely negative levels.

“This is really high returns for a very good quality government with very strong balance sheets,” he said.

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