UBS: Gold Has Had A Great Run, But Don't Expect It To Go Much Higher
1min read Gold has had a great year thus far, with New York gold futures rising by 19.63% over three months and repeatedly hitting record highs.
As a result, Wall Street has recently raised its price targets for gold this year. Among them, Macquarie Group issued the most optimistic forecast, suggesting gold could soar to a historic high of $3,500 per ounce in the third quarter.
Ask Aime: What are the strategic implications of gold's recent price surge, and how might it influence the broader market?
However, ubs analysts believe gold is unlikely to breakthrough the $3,500 benchmark this year, maintaining their target of $3,200. Notably, on Tuesday, gold prices briefly touched $3,170, just one step away from UBS target.
UBS noted that, overall, the shift from outflows to inflows in gold ETFs, continued central bank purchases and strong retail demand for gold products can be seen as broad upward drivers for the gold market.
The institution added that these factors are also why UBS remains bullish on gold and continues to invest in it. However, for gold to reach $3,500 per ounce, stronger catalysts would be needed—such as heightened U.S. tariff risks or geopolitical risks rising to levels that adversely affect the U.S. and global economies.
Ask Aime: Will Gold Reach $3,500 Per Ounce?
In the first quarter of this year, inflows into gold ETFs surged significantly. UBS estimates the inflow at 130-150 tons, a stark contrast to the 114-ton outflow during the same period in 2024.
Data from Standard Chartered shows that investors poured over $19.2 billion into gold ETFs in Q1, marking the largest inflow since the pandemic. The bank's analyst, Suki Cooper, pointed out that the recovery in gold ETFs is the most notable shift in gold's recent dynamics.
The renewed interest in gold ETFs is attributed to multiple factors, including heightened trade and economic uncertainty, the possibility of stagflation, recession risks, and geopolitical tensions—all of which have reinforced gold's reputation as a hedge against extreme risks.
However, Sunil Krishnan, Multi-Asset Head at Aviva Investors, noted that given gold's already significant price rally, it has become more challenging for investors to increase their allocations at this stage.
UBS analysts recommend that, from a long-term perspective, investors allocate 5% of their USD-balanced portfolios to gold as an optimal choice for diversification.
UBS also stated that the rally in gold prices is not just driven by panic buying but also reflects a shift in investor mindset—one that acknowledges the need to accept prolonged uncertainty.
