UBS anticipates that gold prices may drop to around $4,000 an ounce in the near term before structural buyers step in to support the market. Strategist Giovanni Staunovo highlighted that rising real yields and a stronger dollar are increasing the opportunity cost of holding gold, a non-yielding asset. As of Friday, spot gold was trading at $4,191.
The recent decline in gold prices is attributed to non-commercial accounts reducing their net long positions in futures and options. However, ETF holdings have remained strong, with steady inflows observed in recent weeks. Despite the rise in yields, gold has shown resilience, suggesting that its sensitivity to real rates has weakened due to structural demand factors.
UBS points to central bank diversification, concerns about public debt, an expected weaker dollar over time, and robust Chinese buying as key factors supporting gold demand. Central bank purchases maintained a solid pace in September, with China and Uzbekistan leading the way. The bank expects annual central bank purchases to range between 750 to 1,000 tons.
Looking ahead, UBS forecasts gold prices to reach $4,600 by December, $5,000 by March 2027, $5,200 by June 2027, and $5,400 by September 2027. Staunovo recommends pullbacks toward $4,000 as opportunities to add exposure and suggests a mid-single-digit gold allocation for investors who prefer real assets.