UBS Flags Dollar Weakness as Opportunity for Gold Investors

UBS is advising clients to treat any weakness in gold as an opportunity to buy. The Swiss bank believes that falling real interest rates will revive investment demand for gold, making it a more attractive option for investors. This is because higher real yields raise the opportunity cost of holding an asset like gold, which pays no income.

UBS expects inflation to moderate gradually, allowing the Federal Reserve to keep rates steady through 2026 before resuming easing in 2027. This shift towards lower policy-rate expectations should reduce real yields, weigh on the dollar, and help lift investment demand for gold.

The bank sees near-term resilience in the dollar but flags structural risks, including large US fiscal and external deficits, as reasons for renewed weakness further out. A softer dollar has historically supported gold, and UBS expects a renewed push towards diversification away from the dollar to benefit the metal further.