UBS Forecasts Gold to Soar Past $5,400

UBS has revised its gold price forecast, now projecting a significant rise to $5,400 per ounce by September 2027. This elevated target is based on the expectation of disinflation in 2027, leading to a less restrictive U.S. monetary policy and a weaker dollar. The bank's previous end-2026 forecast remains steady at $4,600 per ounce.

Gold's recent price climb reflects investor reassessment of U.S. monetary policy and dollar strength. Federal Reserve uncertainty regarding interest rates, coupled with softer U.S. labor data, has bolstered expectations of stable rates if inflation remains controlled. Demand has also strengthened, with a resumption of gold ETF inflows, initially from China and more recently from Europe.

Central bank acquisitions continue to provide solid support, with net purchases reaching 51 metric tons in June, according to the World Gold Council. The People's Bank of China notably added 20 metric tons to its reserves in July. UBS strategists identify continued dollar weakness, declining U.S. real interest rates, and increasing investor demand as crucial for gold's sustained rally.

For gold to consistently trade above $5,000 per ounce, UBS estimates approximately 500 metric tons of quarterly investment demand will be necessary. The long-term forecast also anticipates disinflation becoming a more prominent theme in 2027, potentially weighing on the dollar and benefiting gold. The strategists suggest selling downside price risk in gold for yield, viewing pullbacks to $4,000 per ounce as opportunities to increase exposure.

The primary risk to this optimistic outlook is a potential Federal Reserve rate hike later this year. Such a move could increase real yields, strengthen the dollar, and dampen gold demand, potentially causing prices to test $3,850 per ounce.