UBS (Switzerland's leading financial services group) has just raised its gold price target for mid-2026 to $4,500/ounce - from $4,200 before, based on expectations of the US Federal Reserve (FED) cutting interest rates, prolonged geopolitical risks, fiscal concerns and strong demand from central banks and ETF investors.
We expect gold demand to continue to increase in 2026, affected by the Feds forecast of rate cuts, real yield cuts, prolonged geopolitical uncertainties, and changes in the domestic policy environment in the US, UBS wrote in a report on Thursday.
The bank also raised its target price in the scenario of a sharp increase of 200 USD, to 4,900 USD/oz, in case of a political and financial risk outbreak, but still maintained the down scenario at 3,700 USD/ounce.
According to UBS analysts, the US's increasingly poor fiscal outlook could support central banks and investors' gold purchases. They also expect ETF demand to remain strong in 2026.
However, UBS warned that the potential "hawl" policy of the FED and the risk of central banks selling gold are still major challenges for the price increase prospect.
"The long-awaited adjustment has been temporarily suspended. Other than technical factors, we do not see any fundamental reasons for the sell-off, UBS wrote in a report.
The Swiss bank noted that a weakening in price action has caused open positions in the futures market to decline for the second time, but stressed that core demand remains strong.
UBS also cited the World Gold Council's Gold Demand trend report for the third quarter, showing "very strong and accelerated buying" from both central banks and individual investors.
Central banks have purchased 634 tonnes of gold this year, slower than last year but accelerating in the fourth quarter, in line with our 2025 forecast of 900-950 tonnes, UBS said.
ETF capital reached 222 tons and demand for gold bars - gold currency exceeded 300 tons for the fourth consecutive quarter, showing increased investment appetite. The demand for jewelry is not as weak as it was concerned, UBS said.
We like to buy when prices are in line, the analysts said, adding that they continue to believe investors rely too little on gold. UBS recommends allocating the average of single-digit gold (about 5%) in the portfolio.
On October 20, Sagar Khandelwal - strategist at UBS Global Wealth Management said that real interest rates falling, the US dollar weakening, government debt increasing and geopolitical fluctuations could push gold prices to 4,700 USD/oz in the first quarter of 2026, while gold mining stocks could increase more strongly.
Although the scale and growth rate of gold may cause increased volatility, we still maintain the view that gold is an important component of a sustainable investment strategy, he wrote.
Khandelwal warned that real US interest rates could fall into the negative zone as the Fed cuts interest rates amid persistent inflation.
We believe this will reduce the attractiveness of the US dollar and boost investment flows into gold. In fact, global gold ETFs recorded the strongest capital flow in September ($17 billion) according to the World Gold Council, making the total capital flow of $26 billion in the three months to September the strongest quarter in history, he said.
UBS believes that investment demand may increase further. With the remaining high purchases by central banks, we expect global gold demand this year to reach around 4,850 tonnes the highest level since 2011 Khandelwal wrote If private investors start diversifying from US Treasury bonds to gold the trend that central banks are pursuing spot gold prices could be pushed even higher.
In the end, as economic, political and policy uncertainty remains, we expect capital flows to continue flowing into gold, which could push prices towards a high scenario of $4,700/ounce, he said. Due to the low correlation with stocks and bonds, especially during times of tight market conditions, we prioritize a one-digit average gold allocation in the diversification portfolio.
In addition, investors can also consider stocks of some gold mining enterprises as their cash flow may increase faster than gold prices in the next six months, Khandelwal added.
