UBS has maintained its forecast for gold to reach $5,400 per ounce by September 2027, while warning that higher U.S. real interest rates and a firm dollar could lead to a short-term decline towards $4,000.
UBS strategist Giovanni Staunovo said the current interest rate environment has increased the cost of holding non-yielding assets such as gold.
Spot prices stood at $4,191 per ounce on Friday at the time of the original report, with the bank identifying $4,000 as a potential support level where longer-term buyers could enter the market.
Staunovo attributed recent selling pressure partly to speculative investors reducing net long positions in gold futures and options.
In contrast, investment flows into gold-backed ETFs have continued in recent weeks, with holdings remaining relatively stable despite movements in bond yields.
Structural Demand Remains a Factor in UBS Outlook
According to UBS, gold’s response to rising real yields has been less pronounced than in previous market cycles.
Staunovo suggested that continued demand from central banks and other longer-term buyers has partly offset the effects of higher interest rates.
The bank identified several factors supporting its gold outlook, including reserve diversification by central banks, concerns about public debt and borrowing costs, expectations for eventual dollar depreciation and demand from China.
UBS also expects seasonal purchases in India to contribute to demand, particularly if prices decline during the country’s festival period.
Preliminary September data showed China purchased 23 metric tons of gold, while Uzbekistan acquired 7 metric tons.
The bank expects total annual central bank purchases to range between 750 and 1,000 metric tons.
Interest Rate Expectations Differ From Market Pricing
UBS noted that financial markets are currently anticipating slightly more than 75 basis points of Federal Reserve rate increases through 2027.
The bank’s own forecast differs, calling for one further rate increase in 2026 followed by two quarter-percentage-point reductions in 2027.
Staunovo expects changes in market expectations surrounding monetary tightening to influence gold prices, particularly if real interest rates begin to decline.
UBS forecasts gold reaching $4,600 per ounce in December 2026, followed by $5,000 in March 2027 and $5,200 in June. Its September 2027 target stands at $5,400 per ounce.
The projections reflect the bank’s expectation that demand from central banks and other investors will continue to influence the gold market even if higher interest rates create near-term price pressure.
UBS Identifies $4,000 as Potential Buying Level
Staunovo expects structural investment demand to provide support if gold prices move back towards $4,000 per ounce.
The strategist considers declines towards that level potential opportunities to increase gold holdings, consistent with UBS’s longer-term price forecasts.
He also recommends that investors interested in real assets consider allocating a mid-single-digit percentage of their portfolios to gold.
The bank’s outlook therefore distinguishes between the possibility of further short-term price declines and its expectations for higher gold prices during 2027, with interest rates, currency movements and central bank purchases remaining principal factors in its projections.
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