Gold prices regain momentum to increase
In a new report sent to customers, UBS strategists said that gold prices have escaped the narrow trading zone of about 100 USD and surpassed the resistance level of 4,250 USD/ounce for the first time in about two months.
According to UBS, buying power from Chinese institutions and capital flows into gold exchange-traded funds (ETFs) are significant supporting factors for the latest increase.
In addition, recent coordinated efforts between the US and Japan to stabilize the yen are also said to contribute to reducing the risk of a sell-off of US Treasury bonds.
However, UBS warns that the gold market still faces many risks in the short term. If US economic data continues to be positive, oil prices remain high, causing prolonged inflation concerns, or the market increases expectations that the US Federal Reserve (Fed) will maintain a tough monetary policy, gold may continue to be under pressure.
However, the Swiss bank believes that short-term fluctuations do not change the positive outlook in the medium and long term.
We expect gold prices to rise to around 5,000 USD/ounce in the first half of 2027" - UBS said.
Reduced real interest rates could pull investors back
One of the most important drivers for gold in the coming time is the prospect of real interest rates falling.
UBS forecasts that inflation will gradually cool down, thereby allowing the Fed to maintain stable interest rates this year before resuming the easing cycle in 2027.
When expectations for operating interest rates fall, real yields are also likely to fall. This will reduce the opportunity cost of holding gold - an asset that does not yield periodic yields.
At the same time, lower interest rates could put pressure on the USD and boost investment demand for precious metals.
UBS also assesses that the USD can still maintain its strength in the short term, but structural issues of the US economy such as large fiscal deficits, foreign exchange deficits and the proportion of investors holding USD assets at a high level may create room for the greenback to weaken again.
Historically, the weakening USD has often been a strong supporting factor for gold prices. The trend of diversifying assets and reducing dependence on the USD is also assessed by UBS as continuing to benefit the precious metal.
Central bank continues to create a "backing" for gold
The gold buying demand of central banks is seen by UBS as one of the important pillars helping to stabilize the market, even during periods of weakening private investment demand.
According to UBS data, central banks purchased about 289 tons of gold in the second quarter. The bank forecasts that total purchases by central banks in 2026 could reach about 750-1,000 tons.
UBS believes that this cash flow alone may not be enough to push gold prices up sharply, but it will contribute to creating a support zone for the market and compensate for the weakening in some segments, such as jewelry gold demand.
Previously, on May 26, UBS lowered its gold price forecast for the end of 2026 from $5,900 to $5,500/ounce due to US Treasury bond yields and the USD remaining at a high level.
However, UBS currently maintains a positive view on gold in the long term and believes that times when prices fall to around 4,000 USD/ounce or lower may become opportunities for investors to gradually increase the proportion of gold in their portfolios.
The above content reflects UBS's assessment and forecast of gold price prospects, not an investment recommendation. Investors need to carefully consider risk factors before making a decision.
