UBS cut its gold price forecasts by up to $900 per ounce across multiple timeframes, citing a Federal Reserve easing timeline pushed to 2027 and stronger US economic data driving higher real yields and dollar strength.

Key Highlights

  • UBS reduced its gold price projections by between $300 and $900 per ounce across multiple time horizons, citing a Federal Reserve easing timeline now pushed to 2027 and stronger-than-expected US economic resilience.
  • Despite the near-term forecast cuts, UBS remains constructive on gold over 12 months, expecting annual central bank buying of 750 to 1,000 metric tons to provide a structural demand floor for the metal.

UBS cut its gold price forecasts by between $300 and $900 per ounce across multiple time horizons on Friday, citing what strategists described as a double headwind from stronger US economic data and a Federal Reserve easing timeline that has been pushed well into 2027. The revision represents one of the most significant downward forecast adjustments by a major bank for gold in recent months.

UBS strategists Dominic Schnider, Giovanni Staunovo, and Wayne Gordon wrote that gold has faced renewed pressure as labour market resilience and higher real yields prompted markets to shift expectations toward the possibility of a rate increase before year end. Higher real yields increase the opportunity cost of holding non-yielding assets like gold, a well-established negative relationship that has historically driven gold lower in periods of Fed hawkishness.

The bank noted that gold's relatively muted response to the escalation between the US and Iran had encouraged some profit-taking, reducing the geopolitical risk premium embedded in gold prices. When a commodity that investors had expected to benefit from Middle East escalation fails to rally meaningfully, it signals that positioning is stretched and that the next move is more likely driven by macro fundamentals than by geopolitical sentiment.

UBS momentum indicators suggest gold prices may continue to gravitate toward the $3,850 to $4,000 per ounce range in the near term. ETF holdings have recorded modest outflows, though the bank said positioning remains far from extreme, leaving scope for renewed investor participation if macro conditions shift in gold's favour.

Despite the forecast cuts, UBS maintained a constructive view on gold over a 12-month horizon, with its base case scenario assuming the Fed implements modest rate reductions in 2027 alongside below-trend US economic growth. The bank also sees scope for dollar weakness given the US's large fiscal deficit and external account imbalance, both of which are traditionally associated with dollar depreciation that historically supports gold prices.

Central bank demand remains the most durable structural pillar in the UBS gold thesis. The bank expects annual central bank buying to remain within the 750 to 1,000 metric ton range, a pace that has been sustained for several consecutive years as emerging market central banks diversify reserve holdings away from US dollar assets. Preliminary data showed major central banks including China's People's Bank continuing to add to gold positions.

For investors asking whether gold is a buy after the UBS forecast cut, the near-term headwinds from higher real yields and a delayed Fed pivot are real. However, the structural demand from central banks and the potential for dollar weakness in 2027 provide a medium-term support case for investors with a patient investment horizon.

This article is for informational purposes only and does not constitute financial advice. Please consult a licensed financial adviser before making investment decisions.