UBS Sees Gold Soaring to $5,200 in 2027 on Weaker Dollar and Easing Inflation

The price of gold has surged over 7% in August, breaking above the $4,000 mark after a sudden burst higher. Analysts at UBS are now targeting $5,200 for gold by June 2027, citing fading dollar momentum and softer US data as support for precious metals.

According to UBS, 'US dollar strength appears to be losing momentum as market confidence in Federal Reserve tightening begins to erode.' This is a welcome development for gold investors, as a weaker dollar reduces the opportunity cost of holding bullion. Additionally, uncertainty over the Fed's outlook can revive demand for defensive assets like gold.

UBS points out that recent US releases have shown easing inflationary pressures and a softer labor market, which do not point to an imminent Fed hike. The bank also notes that changes in the way the Fed assesses inflation could reduce pressure for further tightening. This is seen as a positive tailwind for gold after its difficult spring and early summer.

Gold has rebounded sharply from the $4,000 area, although it remains around 8% lower over three months. UBS's broader macro call is that the bar for renewed dollar strength has become high, with softening macro data, stretched positioning, and growing debate over alternative inflation measures pointing towards further USD consolidation or outright weakness.