Although gold prices have shown quite poor performance since the outbreak of war with Iran, geopolitical risk factors, interest rate policy, inflation and strong core demand can still push this precious metal up to 6,200 USD per ounce by the end of 2026, according to commodity analysts at the Swiss Union Bank (UBS).
In a report released on Friday, experts said gold has not yet broken through the $5,200 per ounce mark since the outbreak of conflict with Iran, although the precious metal usually benefits from safe-haven demand.
According to UBS, this development is in contrast to the 65% increase in gold last year, when increased geopolitical risks combined with fundamental factors such as reduced real interest rates and concerns about public debt have created momentum for gold prices.
Analysts believe that the current developments reflect the familiar behavior of the market in geopolitical events, when investors tend to seek liquidity and switch to other assets such as energy.
UBS cited that after the Russia-Ukraine conflict broke out in 2022, gold prices rose by about 15%, but then fell by 15 to 18% when the US Federal Reserve (Fed) began raising interest rates. A similar scenario also occurred in the Gulf War and the Iraq War, when gold prices rose sharply in the early stages but fell back as tensions eased.
However, recent sideways gold prices do not change UBS's positive views. The bank believes that the precious metal may still increase by more than 20% in 2026.
UBS continues to maintain its forecast that gold prices could rise to the 5,900 – 6,200 USD per ounce range this year. According to experts, gold plays a defensive role against the broad economic consequences of conflict rather than against direct war threats. Precious metals often protect investors from monetary risks such as currency devaluation, increased budget deficits and economic recession, consequences that often arise after geopolitical shocks.
In the short term, gold prices are still under pressure from rising energy prices and inflation concerns, causing the USD to strengthen and raising the possibility that interest rates may remain high. However, UBS believes that central banks will closely monitor inflation risks but it is unlikely to increase interest rates suddenly.
In addition, if the conflict between the US and Iran lasts, the risk of negative impacts on the global economy will increase, thereby promoting demand for gold defense.
In the long term, UBS bank believes that gold is still an effective inflation hedging tool. According to data from the Global Investment Returns Yearbook, the real yield of gold and commodities since 1900 has a positive correlation with inflation.
UBS also emphasized that basic demand for gold remains strong. Although gold ETFs slightly reduced their holdings earlier this month, current positions have become more stable and hedge funds have also slightly increased net buying. Global gold demand is forecast to continue to be solid thanks to central bank purchases, increased investment demand and structural expansion of the jewelry market in Asia as income increases.
According to UBS, with the current economic and political instability, gold is still an effective portfolio diversification tool. Investors who tend to prefer gold may consider allocating a moderate proportion in a diverse investment portfolio.
Mr. Dominic Schnider, Asia-Pacific Regional Commodity and Foreign Exchange Investment Director of UBS Wealth Management, also said that as market volatility subsides, fundamentals will continue to support gold and many other commodities.
According to Schnider, gold could continue to rise to around 6,200 USD per ounce this year thanks to strong demand from central banks and investors, large fiscal deficits, falling US real interest rates and prolonged geopolitical risks.
