Gold posted gains in Asian trading on Wednesday and, according to strategists at UBS, is poised to regain more ground as macroeconomic and structural supports re-emerge.
By 09:56 GMT the metal was trading around $4,552 per ounce, up 1.7% on the day. That level remains about 15% beneath its peak in January after much of the earlier advance was given back amid uncertainty over energy flows and a stronger U.S. dollar.
UBS strategists, led by Mark Haefele, said the recent softness in gold reflected several pressures: concerns about inflation, rising rate expectations, lighter investor positioning and weaker demand from the Middle East tied to supply-chain disruptions. Despite this, the team characterizes the pullback as temporary and sees it as "an opportunity to add positions for those under-exposed to an asset that remains an effective long-term portfolio hedge and diversifier."
The bank reiterated its year-end target of $5,900 per ounce for gold, arguing that monetary conditions should stay generally supportive over the medium term. While Federal Reserve Chair Jerome Powell has adopted a cautious tone, UBS noted that the broader policy bias still points toward easing. According to the strategists, the Fed's median rate path implies two cuts over the next two years, and they wrote, "We expect slowing core goods inflation in the coming months would help clear the way for the next cut."
UBS analysts also highlight how gold's hedging utility often becomes more pronounced later in a crisis cycle. They cautioned that "Gold does not always rally during periods of geopolitical conflicts," but said the traditional drivers - falling real yields, increased liquidity and rising uncertainty - should reassert themselves, rendering gold "a deferred, rather than a failed, portfolio hedge."
Looking further out, the strategists pointed to steady structural demand as an underpinning for gold's upward trajectory. Specific elements cited include diversification away from the U.S. dollar, elevated global debt levels, ongoing central bank buying and stronger jewelry demand in Asia. The team advised investors to consider a mid-single-digit percentage allocation to gold, citing its enduring role as both a hedge and an instrument for portfolio diversification.
UBS maintained its expectation that the metal will recover as those macro and structural drivers reassert, while acknowledging the near-term influences that have weighed on prices in recent months.