Polymetal just the ticket for UBS as macro data points to rising gold price

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FTSE-100 miner Polymetal International PLC (LON:POLY) is a golden ticket, says UBS, predicting US-China trade wars will continue supporting the gold market and suppressing the base metals market.


The Swiss bank rated the gold miner a ‘buy’ and set a target share price of GBP14.00, up from GBP11.7, thanks to its low-cost gold leverage and 5%-plus dividend yield making Polymetal attractive to long-term investors.


UBS also raised its 2020 average price forecast to $1600 from $1550 previously and suggested that gold will be switching hands for $1635 by the end of next year.


The influential house said that if the coming weeks reveals weaker data, additional rate cuts, or a re-escalation of trade tensions, these will all “push [gold] prices higher into year-end”.


In the note to clients, UBS explained: “China/US/European data continues to point to slowing growth & manufacturing/ construction activity and at this point we do not expect a material commodity intensive China stimulus to act as an offset.”


Analysts also noted that so far, for the most part institutional investors have been bullish on gold, but that demand will rise even further if China, the private wealth community, and retail investors cotton on. Silver and platinum might benefit from a “spill over from gold” boosting the price.


The analysts were sceptical of a recovery in commodity demand in the next six months, which will continue to make the backdrop challenging for industrial metals while still supportive for gold.


Meanwhile, industrial copper miner Antofagasta was downgraded to ‘sell’ as UBS predicts lower copper production with higher costs because of stock issues. It also cut itsshare price target to GBP8.

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