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UBS sees gold price challenging $5,000/oz in H1 2027 on lower real rates, softer USD and strong sovereign demand

UBS sees gold price challenging $5,000/oz in H1 2027 on lower real rates, softer USD and strong sovereign demand

KitcoKitco2026/08/13 15:33
By:Kitco

(Kitco News) – Gold prices have faced the strong headwind of a high opportunity cost for much of 2026, but falling real rates will drive investors back to the precious metal, with a weaker dollar and strong central bank demand helping to propel prices back toward $5,000 per ounce in the first half of 2027, according to strategists at UBS.

In a recent client note, the Swiss banking giant pointed out that prices have successfully broken out of their recent $100 trading channel to rise above the $4,250 resistance area for the first time in two months. “Reported Chinese institutional buying and inflows into exchange-trade funds (ETFs) have supported the latest price movement, while recent joint government efforts by the US and Japan to stabilize the yen may also have helped reduce the risk of a sell-off in US Treasuries,” they wrote. 

“Near-term risks remain, especially if US data stay firm, oil prices keep inflation concerns alive, or markets continue to price in a more hawkish Federal Reserve rate path,” the strategists warned. “But while the immediate backdrop may remain volatile, the medium- to long-term case for gold still looks supported by several durable drivers. We expect gold prices to rise toward USD 5,000/oz in the first half of 2027.”

UBS expects lower real interest rates will help to reignite investment demand for the yellow metal. “[W]e expect inflation to gradually moderate, allowing the Fed to hold interest rates steady this year before resuming easing in 2027,” they said. “This should create a more favorable backdrop for gold, as a shift toward lower policy-rate expectations would likely reduce real yields, weigh on the US dollar, and help boost investment demand for gold.”

A softening U.S. dollar and ongoing diversification flows are also powerful medium-term tailwinds for the gold price. “The US dollar may stay resilient in the near term, but structural challenges including large US fiscal and external deficits and already elevated investor allocations to US dollar assets mean there is scope for renewed weakness,” the strategists wrote. “A weaker dollar has historically been a powerful tailwind for gold, while a renewed focus on diversification away from the US dollar should benefit the precious metal.”

Meanwhile, sovereign gold purchases continue to provide a firm price floor beneath the market. “Central bank demand has remained an important pillar of support, even when private investment demand has been lackluster,” they said. “We expect annual central bank purchases to remain elevated, supported by a long-term desire to reduce exposure to USD assets.”

UBS noted that central banks bought 289 tonnes of gold in Q2, and their in-house estimates project full-year purchases to total between 750-1,000 tonnes in 2026. “While these flows may not be enough to drive prices sharply higher on their own, they can help stabilize the market and offset weaker areas such as jewelry demand.”

The Swiss bank advised investors to separate gold’s near-term trading risk from its longer-term investment case. 

“[P]eriods of weakness toward USD 4,000/oz or below may ultimately prove to be opportunities to build strategic exposure,” they said. “For investors with an affinity for real assets, we continue to view a mid-single-digit gold allocation as appropriate within a well-diversified portfolio.”

On May 26, UBS cut its year-end 2026 gold price forecast from $5,900 to $5,500 per ounce, citing risks of persistent headwinds from elevated Treasury yields and sustained U.S. dollar strength.

UBS analysts Dominic Schnider and Wayne Gordon wrote at the time that investors are shying away from the yellow metal as yields stay high.

“Markets are rediscovering the concept of opportunity cost, with gold’s non-yielding characteristics once again becoming a more important consideration as real rates remain elevated,” they wrote.

See live precious metals prices for gold, silver, platinum and palladium — in USD, CAD and 12 more currencies.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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