Gold has given back most of the strong advance it recorded earlier this year, and UBS analysts believe the recent softness is unlikely to be permanent.
The bank highlighted that the metal had been "up as much as 25% in January," but has now "erased virtually all of its 2026 gains." Although gold remains higher on the year, it has fallen close to 11% over the last month.
At first glance the sell-off looks at odds with heightened geopolitical uncertainty, but UBS noted that such a dynamic is not unprecedented. "Gold does not always rally during periods of conflict, particularly in the early stages. The economic context is crucial," the bank wrote, stressing that the wider macro backdrop can trump safe-haven flows in the near term.
In the current episode, UBS pointed to rising energy prices as a key factor that has pushed markets to price in tighter policy from major central banks. That shift raises the opportunity cost of holding non-yielding assets such as gold, the bank said.
Specifically, market expectations have swung sharply - from pricing in "two and a half Fed rate cuts in 2026, to no further easing this year, and even a small probability of a hike." At the same time, bond markets are accounting for multiple rate increases by the European Central Bank and Bank of England.
UBS argued that the market reaction to these developments appears excessive given the potential growth headwinds from higher energy costs. The bank still expects the Federal Reserve to ease later in the year, a development that would reduce the opportunity cost of holding gold and could draw back buyers as the market's flight-to-liquidity phase ends.
On the outlook, UBS said it anticipates the recent decline in gold prices will be relatively short-lived. While acknowledging uncertainty around precise timing, the bank forecast the metal to climb to USD 6,200 an ounce by the end of June before easing back to USD 5,900/oz in early 2027, compared with around USD 4,500/oz at present.
Context and implications
The bank's view links energy markets, bond market pricing and central bank expectations to short-term moves in gold. If UBS's scenario plays out, a return to easier US monetary policy later in the year would be a central driver of renewed demand for the metal.