UBS trims 2026 gold target to $5,500 as yields bite

Swiss banking giant UBS has lowered its year-end 2026 gold price forecast, warning that elevated Treasury yields and a stronger US dollar are continuing to pressure investor demand for the precious metal.

UBS analysts Dominic Schnider and Wayne Gordon cut their year-end target for gold to $5,500 per ounce from a previous forecast of $5,900.

The revised outlook comes as gold struggles to regain momentum after failing to break above $5,200 per ounce during the recent Iran conflict.

The analysts said rising real interest rates have increased the opportunity cost of holding non-yielding assets such as gold.

“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 in a note.

Despite the downgrade, UBS still expects gold prices to finish the year roughly $1,000 above current levels.

ETF demand and futures flows lose momentum

UBS noted that investor appetite for gold has weakened in recent months, particularly across exchange-traded funds and futures markets.

Schnider and Gordon said ETF and futures demand has “softened significantly,” adding that the recent stabilization in investor flows has not yet been enough to restore the strong upward momentum seen earlier in 2026.

The bank argued that gold’s recent sideways trading behavior is consistent with historical patterns observed during geopolitical conflicts.

“For instance, gold jumped 15% after the start of the Russia-Ukraine conflict in 2022, but then declined by 15-18% as the Federal Reserve raised rates,” the analysts wrote.

“The same happened during the Gulf War and Iraq War—prices rose 17% and 19%, respectively, at the start but decreased as tensions eased,” they added.

UBS also said gold has increasingly behaved more as a hedge against broader macroeconomic and monetary risks than as a direct wartime safe haven.

“Gold is more of a hedge against the wider impact of conflicts, rather than direct wartime threats,” the analysts said.

“Gold primarily insulates against monetary risks like currency devaluation, rising deficits, and economic slowdowns, which can result from geopolitical conflicts,” they added.

UBS still bullish on long-term commodity outlook

While near-term pressure from higher yields and dollar strength remains a challenge, UBS analysts continue to see supportive long-term fundamentals for gold and commodities more broadly.

Commodity analyst Giovanni Staunovo said geopolitical tensions involving Iran and risks tied to the Strait of Hormuz continue supporting commodity prices.

“Continued tensions in Iran and risks in the Strait of Hormuz have added upside pressure to both prices and volatility in commodities, most notably oil,” Staunovo wrote in an April research note.

“We continue to see upside for commodities, driven by fundamentals and supply-demand imbalances alongside further geopolitical risks,” he added.

Staunovo said Brent crude had risen from roughly $72 per barrel before the Iran strikes to around $102 per barrel during the conflict escalation.

He also pointed to tightening supply conditions in industrial metals such as copper and aluminum, alongside long-term demand drivers including electrification.

“Over the medium term, we would still expect gold to rally substantially if geopolitical uncertainty remains high while interest rate expectations come down,” Staunovo said.

Structural demand remains supportive

UBS maintained that several structural trends continue supporting gold’s long-term appeal despite short-term volatility.

The bank cited elevated government debt levels, ongoing central bank diversification away from the US dollar, and continued jewelry demand growth across Asia as key supportive factors.

“We expect structural trends such as elevated government debt as well as central banks' and global investors’ efforts to diversify away from the greenback to support gold’s long-term outlook,” the analysts wrote.

UBS also said central bank purchases and stable investment demand should continue underpinning the market.

“So, given the macroeconomic and political uncertainties beyond the risks arising from the US-Iran conflict, we continue to hold a positive view on gold and believe that the yellow metal remains an effective portfolio diversifier,” the analysts added.