(Yicai) Sept. 5 -- UBS has projected that gold prices may reach USD4,000 per ounce, as the precious metal enters a new upward cycle. The Swiss banking giant is among a growing number of international financial institutions that are raising their gold price forecasts as gold futures on the Comex in the New York mercantile exchange continue to hit new highs.

Comex-traded gold futures reached USD3,640.10 per ounce on Sept. 3, pushing international gold prices up 36 percent so far this year. Despite these substantial gains, Wall Street remains bullish on gold.

UBS has reaffirmed its previous forecast that gold could hit USD3,700 per ounce by June 2026, adding that the Zurich-based lender does not rule out a rise to USD4,000 an ounce if geopolitical or economic conditions deteriorate.

Citibank recently raised its gold price forecast for the next three months to USD3,500 per ounce from USD3,300 per ounce, and also hiked the expected trading range to between USD3,300 to USD3,600 from between USD3,100 and USD3,500. 

And Goldman Sachs has maintained its year-end target of USD3,700 per ounce, citing gold purchases by central banks, the risk of economic recession and concerns over the US dollar’s creditworthiness.

The average net value of 20 gold exchange-traded funds has surged around 42 percent this year, according to statistics from financial information provider Wind. Of them, 14 ETFs tracking China’s spot gold prices returned an average of 31 percent over the past year and the other six ETFs that are tied to gold stocks have performed even better, with an average growth rate of 66 percent.

With funds flooding in, the size of gold ETFs has grown significantly. The scale of the 20 gold ETFs has more than doubled since the beginning of the year to CNY160.3 billion (USD22.4 billion), according to Wind statistics. 

The biggest holders of gold ETFs in the first half are the fund companies themselves, using their own capital, according to their semi-annual reports. For example, Guotai Gold ETF’s self-purchased stakes make up 88 percent of its holdings, and for Bosera Gold ETF it is 85 percent.

“Funds have been pouring into gold ETFs this year, partly due to safe-haven demand and partly as a reaction to global economic uncertainty,” said one market analyst. “Although the long-term value of gold as an asset is clear, investors should also be cautious of the risks that come with high premiums.” 

The analyst said that investors are raising their allocations in gold assets through ETFs, but the market should stay alert to the risk of sharp swings in gold prices despite short-term profits. 

Editor: Kim Taylor