UBS: No Sign of Gold Investment Demand, Target Price Remains Unchanged

　　Source: Shanghai Securities News · China Securities Journal

　　Shanghai Securities News correspondent Zhang Jiao reports: Recently, the UBS Wealth Management Chief Investment Office (CIO) issued an institutional opinion stating that gold prices have been consolidating near $4,100/oz. The recent escalation in tensions between the US and Iran continues to put pressure on gold prices, while the prospect of rising oil prices and potentially higher interest rates remains a 'Sword of Damocles' hanging over the gold market. Meanwhile, the June US CPI data provided some relief to investors, which may indicate that the Federal Reserve does not need to raise interest rates again in the short term.

　　UBS believes that the gold market is still digesting the hawkish signals from Fed Chair Powell, as well as the bond market’s expectations for higher US policy rates. If US economic activity unexpectedly strengthens and new jobs data continues to show a tightening labor market—combined with a further rise in oil prices—then gold’s near-term outlook may face additional challenges, with gold prices likely to come under renewed downside pressure. Against this backdrop, UBS expects gold prices could test $3,850/oz, with downside risks increasing further.

　　UBS previously stated that ongoing investment demand and strong central bank buying are key factors supporting gold prices above $4,000/oz. Supported by many countries’ hopes to reduce long-term holdings of dollar assets, central bank buying is expected to remain high, forecasted within the 750–1,000 tonne range for the year. However, although central bank gold purchases help stabilize gold prices, they are not sufficient to drive prices further upwards. The World Gold Council plans to release its latest gold supply and demand trends report on July 29, which is expected to provide greater clarity on central bank buying behaviors.

　　Currently, what the gold market truly needs is stronger investment demand. UBS estimates that quarterly investment demand of around 500 tonnes is required to push gold prices higher. For investment demand to accelerate, US economic narratives need to support a more accommodative monetary policy environment, or pivot towards a challenging growth and inflation combination such as stagflation. As consumer spending slows, real wage growth moderates, and AI-related investment growth is expected to ease year-on-year next year, UBS forecasts that US policy rates will eventually decline, with the next rate cut likely beginning in March 2027. UBS believes that the market repricing of future interest rate trends should occur in tandem with a weakening US dollar and a return to de-dollarization.

　　So where does gold stand now? In the short term, the market seems to be at an impasse; if investment activity does not pick up, risks will likely be skewed to the downside. Nevertheless, in the long term, the probability of a significant gold price decline is low. Short-term weakness in gold prices is not a reason to abandon the asset, as the long-term investment case for gold remains clear and well-supported. Even if strong AI-related spending is able to delay a US economic slowdown, concerns about long-term debt, an elevated US dollar, and global investors’ high exposure to the dollar all leave room for gold to rally again.

　　In light of this, UBS maintains its gold price targets for September and December 2026, as well as March and June 2027, at $4,400/oz, $4,600/oz, $5,000/oz, and $5,200/oz, respectively. From a diversification perspective, UBS remains optimistic about gold, especially for investors who prefer physical assets and those with a multi-generational outlook.

Editor: Zhu Henan