UBS sees gold price falling, but still long-term bullish

Amid gold’s recent weakness, UBS Group has once again trimmed its near-term outlook on the yellow metal, though the bank still sees prices reaching higher over the longer horizon.

In a note published last week, the Swiss bank said it sees prices dropping by another $300 to $900 per oz., citing what it calls a “double whammy” of stronger U.S. economic data and a delayed Federal Reserve easing. On Monday, gold rose by 3.3% to $4,339.50 per oz. following reports of a U.S.-Iran deal – as lower oil prices eased inflation and rate-hike fears – rebounding from a low of about $4,126 per oz. on June 10. 

“Gold has faced renewed pressure as resilient labour market data and higher real yields prompted markets to shift expectations toward a possible rate hike this year,” UBS strategists Dominic Schnider, Giovanni Staunovo and Wayne Gordon wrote.

The momentum indicators now suggest that prices “may continue to gravitate toward the $3,850-4,000/oz. range in the near term,” they added.

‘Muted response’

The revision, according to the UBS analysts, follows gold’s “muted response to the escalation between the U.S. and Iran [which] has encouraged some profit-taking.” They believe that has left prices “more exposed to traditional macro drivers like real yields and the dollar.”

It follows the bank’s downward revision in May, when it trimmed its year-end target from $5,900 to $5,500 per ounce.

Since then, gold prices have declined further after the latest round of U.S. data releases, which included a stronger-than-expected jobs report. That print reinforced market expectations of a Fed rate hike, which could begin as early as December.

Gold tends to perform best when real interest rates are low or falling, and the threat of rate hikes in the wake of the U.S.-Iran war has created downward pressure on the metal. After surging to a record high of nearly $5,600 per oz. in January, gold has now erased almost all of its gains this year.

Long-term bullish

Still, banks including UBS see gold rebounding in the coming months, with prices supported by strong central bank demand for the metal as well as the deteriorating U.S. fiscal situation.

A potential end to the Middle East conflict is also seen as a tailwind.

In its note, UBS said it remains “constructive on gold over the next 12 months,” with its base case still assuming the Fed cuts rates by up to 50 basis points in 2027 alongside below-trend U.S. growth.