UBS Sticks by Gold Price Forecast Amid Higher US Interest Rates

The gold price forecast from UBS suggests that despite higher US interest rates complicating its trajectory, gold could recover to $4,600 by December. This projection comes on top of a current price of $4,347 an ounce, which has dropped 1.8% over the week. However, even with two expected Federal Reserve rate increases this year, UBS still sees a gain of around 24% from Friday's close to reach its target of $5,400 in September 2027.

UBS attributes the continued appeal of gold as a strategic portfolio hedge and diversifier, rather than a tactical expression of the next Fed decision. Central bank demand remains robust due to reserve diversification and a desire to reduce exposure to US dollar assets. Private investment has also strengthened with $18 billion flowing into gold-backed exchange-traded funds in August, pushing holdings to a record 4,189 tonnes.

The bank acknowledges that higher real rates and a stronger US dollar may offset some of the pressure from its view, but believes the effect could be counteracted by inflation, geopolitical uncertainty, or concerns about fiscal and monetary credibility persisting. The gold price forecast is also underpinned by the World Gold Council's figures showing private investment strengthening in August.