After suffering one of its sharpest corrections in years, gold could be poised for a powerful rebound, according to UBS, which believes the precious metal could climb about 28% over the next 12 months as expectations for U.S. monetary policy shift, the dollar weakens, and central banks continue accumulating bullion.
The bullish outlook contrasts with the growing caution among several major investment banks, many of which have recently cut their gold price forecasts after the metal tumbled from record highs amid a stronger U.S. dollar and expectations that the Federal Reserve would keep interest rates elevated for longer.
Spot gold is currently trading around $4,040 an ounce, down roughly 23% from its record highs reached in January, ending a remarkable rally that saw prices surge approximately 150% from around $2,000 an ounce in early 2024 to nearly $5,600 an ounce at their intraday peak in early 2026.
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The correction has been driven largely by higher U.S. Treasury yields, renewed dollar strength and fading expectations for imminent Federal Reserve interest-rate cuts, all of which have reduced the appeal of non-yielding assets such as gold.
However, UBS believes investors have become overly pessimistic.
UBS Targets $5,200 Gold
In a research note published on June 25, UBS projected that gold could recover to approximately $5,200 per ounce over the coming year, driven by three major catalysts that it believes markets are currently underestimating.
The first is monetary policy.
According to the Swiss bank, investors have become excessively hawkish following Kevin Warsh’s first Federal Reserve policy meeting as chairman, pricing in a higher probability that interest rates will remain elevated or even rise further.
UBS disagrees with that assessment.
Instead, the bank believes the next meaningful move by the Federal Reserve is more likely to be an interest-rate cut as economic growth slows over the coming year.
Lower interest rates generally benefit gold because they reduce the opportunity cost of holding an asset that generates no income while simultaneously increasing demand for traditional safe-haven investments. UBS expects slowing economic activity to eventually force policymakers to adopt a more accommodative stance, creating favorable conditions for bullion prices.
Weaker Dollar Could Provide Major Tailwind
The second pillar supporting UBS’s bullish outlook is the U.S. dollar. The bank argues that investor positioning in the dollar has become increasingly crowded, while America’s expanding fiscal deficits could gradually undermine the currency.
Historically, gold has exhibited a strong inverse relationship with the dollar because a weaker greenback makes dollar-denominated bullion less expensive for international buyers, supporting global demand.
UBS Global Head of Equities Ulrike Hoffmann-Burchardi said: “A weaker dollar has historically been a powerful tailwind for gold.”
Should the dollar retreat as investors unwind long positions, gold would likely receive additional support.
UBS also believes official-sector demand will remain one of gold’s strongest long-term supports. Central banks have been among the largest net buyers of gold over the past several years as many countries diversify foreign exchange reserves away from the U.S. dollar amid rising geopolitical tensions and increasing fragmentation of the global financial system.
The bank pointed to continued purchases during May, when Poland bought 18 metric tons of gold, while China added another 10 metric tons to its reserves. According to UBS, sustained annual central-bank purchases should continue providing a structural floor beneath gold prices even if investment demand remains volatile.
Beyond its price outlook, UBS continues to recommend maintaining strategic exposure to gold within diversified investment portfolios. Hoffmann-Burchardi suggested that investors consider allocating a mid-single-digit percentage of their portfolios to bullion.
She said gold continues to offer diversification benefits because of its relatively low correlation with traditional financial assets.
“Its relatively low historical correlation with traditional asset classes means that it should add to overall portfolio resilience over time,” she said.
That defensive characteristic has become increasingly valuable as investors confront persistent geopolitical uncertainty, elevated government debt levels and shifting monetary policy expectations.
Contrasting Outlook With Rival Banks
UBS’s optimism stands in contrast to several major investment banks that have recently lowered their gold forecasts following the recent price correction.
Goldman Sachs last week reduced its year-end target to $4,900 per ounce, down from its previous forecast of $5,400, after abandoning expectations for Federal Reserve rate cuts this year. ING has also revised its outlook lower, forecasting gold will average about $4,600 per ounce by year-end instead of the $5,000 it had previously expected.
Earlier, Deutsche Bank likewise trimmed its forecasts, citing softer exchange-traded fund inflows, weaker physical demand from China and India, higher bond yields and a stronger dollar.
Those revisions illustrate how rapidly market sentiment has shifted after gold’s historic rally. Only months ago, some analysts were debating whether bullion could reach $6,000 per ounce, supported by central-bank buying and anticipated monetary easing. Instead, expectations have become more restrained as investors reassess the interest-rate outlook and global economic conditions.
UBS, however, believes the recent sell-off represents a temporary correction rather than the end of gold’s longer-term bull market, arguing that slowing global growth, eventual monetary easing, persistent central-bank demand and a softer U.S. dollar should combine to restore momentum over the coming year.