According to analysts at the leading multinational financial and banking group based in Switzerland (UBS), gold prices have not yet fully reflected the impact of the geopolitical escalation wave taking place around Iran. When considering the roadmap for US Federal Reserve (Fed) interest rate easing and increased demand across the market, gold prices are likely to increase by about 1,000 USD/ounce in June.
Although the reaction of gold prices to the recent increase in geopolitical tensions is still quite modest, we believe there is still room for increase," UBS analysts wrote in a report released on Monday. "Our forecast is that this precious metal will reach $6,200/ounce in the next few months, as the key drivers behind the strong increase remain.
UBS said geopolitical risks are forecast to remain high. "With two aircraft carriers, fighter jets and refueling aircraft believed to be present in the area, the scale of US military deployments is now larger than when it was off the coast of Venezuela in the weeks before Mr. Trump removed Mr. Nicolas Maduro earlier this year," the analysis group said - "The possibility of reaching an agreement with Iran remains open, while the possibility of US military action in the short term is becoming increasingly apparent.
More broadly, geopolitical instability is unlikely to decline, considering Mr. Trump's foreign policy approach," UBS added - "Although geopolitical events often do not leave a long-term impact on the global market, they can trigger short-term fluctuations, thereby supporting demand for portfolio hedge tools like gold.
According to UBS, the Fed's policy easing cycle will also continue to support gold prices. "The weakening USD and lower US real interest rates are favorable factors for gold, and we believe that this macroeconomic context remains, as the Fed still has room to continue easing," analysts wrote. "Despite recent strong employment data and some'hawkish' signals in the minutes of the latest FOMC meeting, inflationary pressure is forecast to ease in the coming months, along with the Fed's personnel restructuring becoming more moderate by the end of this year, which will pave the way for additional interest rate cuts. We expect two interest rate cuts, each of 25 basis points, before the end of September.
UBS also forecasts that gold demand will continue to increase in 2026. "Data from the World Gold Council shows that total gold demand exceeded 5,000 tons for the first time in 2025, and we expect demand to continue to increase, supported by more vibrant investment and strong buying power from central banks," UBS said. "Increase in imports in Asia will also strengthen structural demand for jewelry gold in the long term. Meanwhile, supply is still almost flat. Although high gold prices may boost mining exploration and development, Wood Mackenzie estimates that up to 80 mines will run out of current production plans by 2028.
According to UBS, the combination of the above factors creates a very favorable environment for gold prices to continue to increase.
We maintain a positive stance on gold and see this precious metal as an effective portfolio diversification tool, helping to hedge against many market and economic risks," analysts emphasized. "Gold-loving investors may consider allocating at an average one-digit level in a diverse portfolio.
Previously, on February 16, Mr. Dominic Schnider, Head of Commodities and Director of Foreign Exchange Investment in the Asia-Pacific region of UBS Wealth Management, said that when volatility subsides, gold and other key commodities will be supported by positive fundamentals.
Precious metal prices, despite fluctuations, still increased in January as political, geopolitical and economic incertitudes boosted safe-haven demand," Mr. Schnider wrote in a commodity update. He also noted that copper prices set new records at the end of January before entering a correction phase, while oil prices were supported by short-term supply disruptions in the US and Kazakhstan, along with a weaker USD and tensions in the Middle East.
According to Mr. Schnider, as recent volatility continues to cool down, UBS believes that fundamental factors for gold and other important commodities are still supportive.
We expect gold to resume its upward momentum, possibly reaching $6,200/ounce by mid-year, thanks to demand from central banks and investors, large fiscal deficits, lower US real interest rates and geopolitical risks," he said. "We also forecast that the short supply of copper and aluminum will continue in the medium term, while structural drivers such as the electrification process will support long-term demand.
Mr. Schnider believes that investors who do not currently hold gold in their portfolios should consider adding, while those who already have a large proportion may consider diversifying to other commodities.
For investors who prefer gold, we believe that a moderate ratio can improve diversification and create a buffer against systemic risks," he wrote. "For investors who hold large amounts of gold and have not made significant profits, expanding to copper, aluminum and agricultural assets can help diversify future productivity sources.
Commodities are expected to play a more prominent role in the 2026 investment portfolio, bringing diversity between the supply-demand imbalance, geopolitical risks and the global energy transition," Mr. Schnider emphasized - "We prefer wide exposure to commodities and continue to value gold as an attractive hedge.
Mr. Schnider's forecast of 6,200 USD/ounce for gold is a sharp increase compared to just a month earlier. On January 5, he predicted that central bank buying, increased fiscal deficit, lower US interest rates and prolonged geopolitical risks would push gold prices up to 5,000 USD/ounce by the end of Q1.
Commodities will play an increasingly important role in the 2026 portfolio" - he wrote - "In this asset group, we see clear opportunities in copper, aluminum and agriculture, while gold is still a valuable portfolio diversification tool".
He also believes that tight supply and increased demand are likely to support the prices of many commodities in 2026, and believes that gold's upward momentum will continue this year. "From our point of view, gold prices will continue to rise, supported by central bank buying power, large fiscal deficits, low US real interest rates and prolonged geopolitical risks," he concluded.
