UBS flagged a potential retest of support near $4,000 an ounce for gold, saying that headwinds from higher U.S. real yields and a firm dollar could drag the non-yielding asset lower in the near term. "Near-term headwinds persist: High U.S. real yields and a firm dollar could push gold back toward $4,000/oz," UBS strategist Giovanni Staunovo said in a note.
At the time of writing, spot gold was trading at $4,191 on Friday. UBS expects that, if prices approach the $4,000 mark, structural dip buyers will help establish a floor under the market.
Investor positioning and ETF flows
According to UBS, the recent downward pressure appears to have been driven largely by non-commercial accounts trimming net long positions in futures and options. In contrast, exchange-traded fund holdings have remained "unusually resilient," with steady inflows observed in recent weeks, the bank said. That divergence suggests speculative activity has been a key driver of the pullback while broader investor demand has stayed relatively firm.
Structural demand and sensitivity to yields
Staunovo argued that gold has shown notable resilience despite a sharp rise in yields, implying that the metal's sensitivity to real rates has diminished as structural sources of demand exert a stronger offset than in prior cycles. UBS listed several elements supporting that structural demand: central bank diversification, worries about public debt and debt-servicing costs, an expected weaker dollar over time, and robust Chinese buying. The bank also noted that Indian demand should get a boost from the festival season and from lower prices.
Central bank buying and totals
Preliminary data for September point to a continued solid pace of central bank purchases, led by China at 23 metric tons and Uzbekistan at 7 tons, UBS said. The bank maintains its forecast for annual central bank purchases in a range of 750 to 1,000 tons.
Monetary policy outlook and price path
Markets are pricing in a little more than 75 basis points of Federal Reserve rate hikes through 2027. UBS expects one more hike this year and anticipates two 25 basis point cuts in 2027. As markets reassess the scope for further tightening, UBS says lower real yields would be expected to push gold higher.
UBS set out a path for higher prices over the coming quarters, forecasting gold at $4,600 by December, $5,000 by March 2027, $5,200 by June 2027 and $5,400 by September 2027.
Investment guidance
Staunovo said pullbacks toward $4,000 "offer opportunities to add exposure," and recommended a mid-single-digit allocation to gold for investors seeking real assets.