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GOLD'S PAIN TRADE SEEN AS TEMPORARY AS RECORD HIGHS BECKON

Gold may be nursing a more than 15% loss since U.S. and Israel launched strikes on Iran at the end of February, but UBS’s Chief Investment Office still sees the metal reclaiming record highs before year-end.

Gold has buckled under worries that elevated energy prices will force the Federal Reserve to keep monetary policy tighter for longer, defying its traditional safe-haven appeal. Investors have also favored money market instruments over gold for liquidity in recent weeks, adding to the pressure.

UBS has trimmed its year-end forecast to $5,500 an ounce from $5,900, though the bank still sees the metal surpassing its prior record high of roughly $5,400.

Ulrike Hoffmann-Burchardi, CIO Americas and Global Head of Equities at UBS Financial Services, sees the bull case for the yellow metal resting on three pillars.

First, UBS expects the Fed to cut in December, followed by further easing in March 2027, which should ease pressure from 2-year Treasury yields — up nearly 60 basis points since the conflict began.

Second, central bank demand should hold at 200 to 250 metric tons in Q2, which would more than offset softer ETF and jewelry demand. Third, gold will benefit as a hedge against swelling global debt burdens — with the U.S. deficit approaching 8% of GDP.

Near-term, the metal remains hostage to Iran headlines, energy prices, Treasury yields and the dollar. Medium-term, UBS stays positive.

(Karen Brettell)

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