UBS Sees Further Upside for Gold Amid Geopolitical Tensions

Gold has recently been trading near record highs above $4,700 per ounce, supported by safe-haven demand during the Iran conflict. UBS analysts argue that this environment, combined with robust official sector purchases, could push prices toward $5,000 per ounce by year-end, while noting that improved geopolitical conditions or a stronger U.S. dollar may cap further gains.

UBS Outlook and Key Drivers

According to UBS, its bullish stance on gold is underpinned by several concurrent factors. The bank highlights that the Iran war has disrupted global energy markets and created significant uncertainty for investors, reinforcing gold’s role as a hedge in periods of heightened risk.

UBS also points to elevated inflation expectations as a supportive factor for gold prices. In this context, gold is seen as a store of value that can help protect portfolios from the erosion of purchasing power. The bank further notes that central banks, particularly in emerging markets, continue to accumulate gold reserves at a robust pace, adding another layer of demand.

Under these conditions, UBS forecasts that gold could climb from current levels near $4,700 per ounce to around $5,000 per ounce by the end of the year, assuming geopolitical tensions remain elevated.

Risks to the Bullish Scenario and Impact on Other Metals

While retaining its positive view, UBS identifies several downside risks. The bank cautions that a resolution to the Iran conflict could ease safe-haven demand, potentially reducing upward pressure on gold prices. In addition, a significant strengthening of the U.S. dollar is cited as another factor that could weigh on gold, as it typically makes the metal more expensive for non-dollar buyers.

UBS also expects silver and other precious metals to benefit from the supportive environment created by strong gold prices. However, the bank notes that these metals are likely to exhibit higher volatility than gold, implying potentially larger price swings even within a generally constructive backdrop.

FAQ

What gold price level does UBS forecast by year-end?
UBS forecasts that gold could reach approximately $5,000 per ounce by the end of the year, provided geopolitical tensions remain elevated.

What main factors does UBS cite for its bullish gold outlook?
UBS cites ongoing geopolitical tensions from the Iran war, elevated inflation expectations, and robust central bank gold buying, particularly from emerging markets, as the key drivers.

What risks could negatively affect gold prices according to UBS?
UBS notes that a resolution to the Iran conflict or a significant strengthening of the U.S. dollar could weigh on gold prices and limit further gains.

How are silver and other precious metals expected to perform?
UBS expects silver and other precious metals to benefit from the bullish gold environment, though it anticipates higher volatility in these markets compared with gold.