UBS Expects Gold to Find Support Around $4,000

UBS is optimistic about the medium to long-term outlook for gold, predicting that prices may find support around $4,000 per ounce and rise to $5,400 by September 2027. Despite the pressure from a stronger dollar and rising U.S. real interest rates, the divergence between short-term speculative fund liquidation and medium to long-term allocation demand is key to understanding the current gold price trend. UBS strategist Giovanni Staunovo pointed out that the rise in real interest rates and a strong dollar have increased the opportunity cost of holding non-yielding gold, leading to a recent reduction in net long positions in gold futures and options by non-commercial traders, which has intensified downward pressure on prices. However, holdings in gold exchange-traded funds (ETFs) remain resilient, with continued inflows in recent weeks, indicating that some investors have not exited the gold market simultaneously. This divergence suggests that while speculative fund liquidation may depress short-term gold prices, it does not necessarily indicate a reversal in medium to long-term allocation demand. UBS believes that gold has shown greater resilience in the face of significant increases in U.S. real yields compared to the past, reflecting that structural demand may be partially offsetting interest rate pressures. Real interest rates and the dollar remain important variables affecting short-term trends, and gold prices may continue to decline.

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