The Chair of the Federal Reserve, Jerome Powell, acknowledged that the national debt of $39 trillion is "not unsustainable," but if urgent measures are not taken, the current development trend "will not lead to a good outcome."

Currently, the Fed's rate is in the range of 4% to 5%, and in the future, the cost of servicing the debt could reach 5.5% of U.S. GDP, making debt repayment a serious constraint on the U.S. federal budget. If this risk continues to grow, the market will pay more attention to this issue, which is why a diversified investment strategy is very important.
The protective function and monetary nature of gold have maintained high attractiveness in recent years, and the market has once again assessed the potential escalation of conflict in the Strait of Hormuz. Today, the global gold price has again exceeded $4,800 per ounce, demonstrating market optimism, but it remains uncertain whether the gold price increase will stabilize in international markets.

Compared to international gold prices, the significant rise in international silver prices (which is usually observed during the rise of risky precious metals) indicates that investors are not only seeking protection but also actively increasing their positions in challenging markets to gain additional income.

According to Giovanni Stano, a commodities market analyst at UBS, prices for commodities like gold and oil could continue to rise significantly even after the conflict in the Middle East ends. However, investors with large gold holdings should also consider expanding their investment portfolios with other commodities.

Although the premium for geopolitical risks may gradually decrease, the fundamental indicators of commodity markets continue to support them. In the future, shortages of copper and aluminum supplies may occur. For investors who prefer gold, a moderate gold allocation in the portfolio can enhance diversification and protect against systemic risks. For those who have already invested heavily in gold and have substantial unrealized profits, UBS recommends diversifying into other commodities such as copper, aluminum, and agricultural products to further diversify potential income sources.
UBS remains confident that this year, the international gold price could reach $5,900 to $6,200 per ounce. Gold primarily serves as a hedging tool against the broad consequences of conflicts, with its main function being protection against risks such as currency devaluation, rising budget deficits, and slowing global economic growth caused by geopolitical conflicts.

Although short-term increases in global energy prices and the possible rate hike by the Fed due to inflation risks cause market concerns and do not support a rise in international gold prices, UBS considers the likelihood of a rate increase to be low. The longer the conflict in the Middle East lasts, the higher the risk of negative economic consequences, which is likely to increase demand for gold as a store of value.

Potential demand for gold remains resilient, and structural trends will continue to enhance gold's attractiveness. Factors such as rising government debt, central banks' and international investors' pursuit of asset diversification to reduce dependence on the dollar, are likely to support the growth of international gold prices in the future. UBS maintains an optimistic outlook on international gold prices and considers gold an effective tool for portfolio diversification.