UBS expects falling real interest rates and a softer dollar to revive investment demand for gold as the Federal Reserve holds rates through 2026 before easing in 2027. The bank frames dips toward $4,000 an ounce or below as buying opportunities rather than warning signs.
UBS told clients to treat pullbacks in gold as buying opportunities, betting that falling real yields and a softening dollar will keep the metal's structural case intact. The bank's reasoning rests on gold's traditional drawback, that it pays no income, which becomes less of a deterrent once the opportunity cost of holding it falls.
Fed path drives the real-rates call
UBS's base case has inflation cooling gradually through the rest of the year. That would let the Fed hold rates through 2026 before resuming easing in 2027, a path that would pull real yields lower, pressure the dollar, and draw fresh investment flows into gold, according to UBS. Lower real interest rates would revive investment demand for the metal, the bank said, since higher real yields raise the cost of holding an asset that generates no income.
Dollar seen resilient near term, weaker later
UBS sees room for the dollar to hold up in the near term, but the bank points to structural pressures further out, including sizeable US fiscal and external deficits alongside already stretched investor exposure to dollar assets. A softer dollar has historically supported gold, and UBS said a renewed push by investors to diversify away from the currency would likely benefit the metal further.
Central banks keep buying through soft patches
Central banks remain the other pillar propping up the market, continuing to buy even through stretches when private investment demand has been soft, UBS noted. Central banks added around 290 metric tons to reserves in a strong second quarter. UBS now expects full-year purchases in the 750 to 1,000 metric ton range. UBS framed that buying as a stabilising force rather than a standalone catalyst, useful for offsetting softer pockets of demand such as jewellery, but unlikely on its own to drive prices sharply higher.
UBS's stance reads as constructive through the cycle rather than tactically bullish in the immediate term. The bank explicitly framed weakness toward $4,000 an ounce or below as a buying opportunity rather than a signal to step back.
Source: Investinglive
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