Geopolitical concerns have moved to the forefront of client conversations at Union Bancaire Privée (UBP), according to Norman Villamin, the bank’s chief strategist.

Geopolitical tensions have been escalating in recent months with the military intervention in Venezuela and the rift in ties between the US and the EU over Greenland.

Villamin asserts that most of the geopolitical risk can be characterised as “resource nationalism” whereby the main superpowers compete for critical resources.

“What is underlying all of this is securing resources for national security because a lot of these resources feed into the AI [artificial intelligence] infrastructure chain,” he said at a media briefing in Hong Kong, pointing to the rare earth metals deal between the US and China as one recent example.

Rather than thinking about which country Trump will target next, Villamin says a better approach is to think about potential supply shocks and what opportunities that creates for investors to protect portfolios.

Remaining risk-on

Despite rising geopolitical risks, the current environment remains supportive to stay invested and take risk in portfolios, according to Nicolas Laroche, global head of advisory & asset allocation at UBP.

“It’s not an easy exercise to take risk in this environment,” he said. “It’s very difficult to find anything cheap at the moment, if it’s equities, bonds, sectors, most of everything is quite expensive.”

However, he argued that the valuations are justified given the “robust” and “solid” environment for earnings growth and for credit.

“We continue to like AI, despite all the performance and the noise of a bubble. We don’t think it is a bubble, so we continue to be invested in tech.”

Laroche also said the bank has started to invest in utilities and commodities as part of the theme of enabling the infrastructure buildout for AI.

Gold remains attractive

UBP also has a constructive view on gold as an alternative investment, despite its recent rally to all-time highs, approaching the $5000 per ounce level.

Peter Kinsella, global head of forex strategy at UBP, said the bank has a large position in gold, having previously increased its exposure to a total of 15% of its portfolios.

“This was a massive contributor to our discretionary portfolio outperformance,” he said. “Today we’ve got about 7% and will increase that on any dip.”

“My view is that we’ll be at levels of at least $5200 per ounce by the end of this year, and I think it’s pretty clear, given the momentum that we’re seeing, that there are significant upside risks to this target.”