World gold prices continue to be supported by a downward trend depending on the USD and concerns about US finances. Swiss bank UBS believes that the precious metal still has room to increase sharply, towards 5,400 USD/ounce in the next 12 months.
Gold prices are benefiting as the demand for diversification of assets away from the USD returns, amid growing concerns about the US fiscal outlook. According to experts from the Chief Investment Office of UBS, this trend may continue to support the precious metal in the medium and long term.
In a new report, UBS said the DXY index fell 2.4% in the past month, while gold prices rose about 15% in August. The Swiss bank said gold is one of the assets that clearly benefits from the diversification trend away from the USD.
According to UBS, the USD may receive some short-term support from tensions in the Middle East and high oil prices. However, in the medium and long term, the downward trend depending on the USD is still likely to continue due to concerns about the US fiscal situation, instability in trade policy and the diversification of foreign exchange reserves by many countries.
UBS believes that these factors create a favorable environment for gold prices. Precious metals are considered valuable storage tools and alternative assets to traditional reserve currencies.
Notably, UBS forecasts that gold prices could reach 5,400 USD/ounce in the next 12 months. This forecast level is significantly higher than the current price range and shows that this bank still maintains a positive outlook for the precious metals.
Another driving force comes from investment cash flow. UBS said that capital inflows into gold ETFs have begun to return, while gold buying activities of central banks remain at a high level.
Notably, the People's Bank of China (PBoC) increased its gold reserves by 20 tons in July, the largest monthly increase since October 2023. According to UBS, the gold buying demand of central banks continues to be an important pillar for the market.
Previously, UBS predicted that gold prices would reach 5,000 USD/ounce in the first half of 2027. The bank believes that falling real interest rates, weakening the USD and demand for gold from central banks will boost investment flows back to the precious metal.
According to UBS, if inflation gradually cools down, the Fed may maintain stable interest rates this year before resuming the policy easing process in 2027. This scenario could reduce real yields, put pressure on the USD and create a more favorable environment for gold prices.
The Swiss bank also assessed that gold demand from the official sector continues to lay the foundation for the market. Central banks purchased 289 tons of gold in the second quarter, while UBS forecasts that the total purchase volume of this sector in the whole year 2026 could reach 750-1,000 tons.
According to UBS, central bank demand may not be enough to push gold prices up sharply on its own, but it will help stabilize the market and compensate for areas with weaker demand, such as jewelry.
Despite positive long-term prospects, UBS also warned that gold prices may still fluctuate strongly in the short term. US economic data continues to be strong, oil prices remain high or the market increases expectations of the Fed tightening may put pressure on precious metals.
However, UBS believes that these factors do not significantly change the medium and long-term outlook for gold. The bank believes that corrections to the 4,000 USD/ounce or lower range could become an opportunity for investors to increase the proportion of gold in their long-term portfolios.
Thus, along with the forecast of 5,400 USD/ounce in the next 12 months, UBS is betting on the combination of many supporting factors for gold prices, including the trend of diversification away from the USD, the possibility of real interest rates falling, ETF capital returning and sustainable gold buying demand from central banks.
