The reason for this adjustment is due to expectations that the US Federal Reserve (FED) will loosen monetary policy and a weak USD due to interest rate cuts as well as geopolitical risks.
The Swiss bank also adjusted its forecast for gold held by ETFs, saying that by the end of 2025, it will surpass 3,900 tons, approaching the record of 3,915 tons set in October 2020.
We maintain our view that gold is an attractive asset and continue to hold the metal in our global asset allocation portfolio. Our analysis shows that the ratio of gold allocation to an average of one-digit (%) is optimal, UBS said in a report.
UBS highlighted factors such as geopolitical tensions and policy differences between the US government and the Fed that are increasing the attractiveness of gold, along with US President Donald Trump's view of supporting low interest rates.
UBS forecasts central banks will continue to buy gold strongly, around 900-950 tons this year, just slightly below last year's nearly record of more than 1,000 tons.
The main risk for gold is that the Fed could be forced to raise interest rates if inflation suddenly increases, UBS warned.
Gold, which is not profitable and is often seen as a safe haven asset in times of economic and political uncertainty, as well as a downward trend in interest rates, set a record of $3,673.95/ounce on Tuesday and has increased by more than 39% since the beginning of the year.
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