The Swiss major bank UBS has significantly raised its medium-term forecast for the gold price. The institute is now setting a target of 4,500 US dollars per ounce for mid-2026 – 300 US dollars more than in the previous estimate.
The more optimistic outlook is justified by expected interest rate cuts by the US Federal Reserve, persistent geopolitical tensions, growing fiscal risks in the USA, and strong demand for gold from central banks and exchange-traded gold funds (ETFs).
In a current analysis, UBS writes that it expects gold demand to increase further in 2026, driven by a mix of lower real interest rates, political uncertainty, and changes in the domestic political environment of the USA.
UBS Sees Gold as a Beneficiary of Interest Rate Cuts and Geopolitical Risks
In its base scenario, UBS assumes that the US Federal Reserve will initiate a cycle of falling key interest rates in the coming year. This would generally be a positive environment for gold: Lower interest rates reduce the opportunity costs of a non-interest-bearing investment and have historically often supported demand for the precious metal.
In addition, UBS refers to the role of gold as a classic hedging instrument in phases of geopolitical tension. Persistent conflicts and an uncertain global political situation have repeatedly led to inflows into the gold market in recent years – a trend that analysts also see continuing in 2026.
The focus is also on the financial policy situation of the USA. According to the bank’s assessment, a deteriorating budget situation with high deficits and growing debt could prompt both central banks and private investors to further expand their gold holdings. In this context, UBS emphasizes the advantage of the precious metal of not carrying any counterparty risk – unlike bonds or other securities related to an issuer.
Against this background, the bank expects ETF inflows to also play an important role. After sometimes fluctuating developments in recent years, UBS expects continued stable or even increasing demand for physically backed gold ETFs for 2026.
Gold: UBS Sees Upside Potential to $4,900 – but also Risks
In addition to the base scenario with a target of 4,500 US dollars per ounce, UBS also outlines a positive and a negative case for the gold price. In the so-called upside scenario, the bank raises its price target by 200 US dollars to 4,900 US dollars. According to the analysts, this scenario would be realistic if political and financial risks increase significantly – for example, through an escalation of geopolitical conflicts, an unexpected crisis on the capital markets, or a further deterioration of US fiscal data.
In contrast, the negative case remained unchanged: In the downside scenario, UBS sees the gold price at 3,700 US dollars per ounce. This environment would be conceivable if, contrary to current market expectations, the US Federal Reserve pursues a significantly more restrictive line – i.e. keeps interest rates high for longer or even raises them again. Such a procedure would increase real interest rates and reduce the incentive to hold gold as an alternative investment.
The bank also points out that while the strong demand from central banks has a supportive effect, it could also swing in the opposite direction in a different environment. Should individual central banks bring larger parts of their gold holdings onto the market, this could temporarily put pressure on the price. UBS therefore describes the risk of gold sales from the official sector as one of the central uncertainties for the outlook.
Central Banks and ETFs Remain Key Factors in the Gold Market
A central element of the UBS forecast is the role of the official sector. In recent years, numerous central banks have expanded their gold reserves, making a significant contribution to demand. UBS assumes that this trend will continue in an environment of fiscal uncertainty and increasing currency diversification.
Gold is used in the reserve management of many central banks as an instrument for risk diversification – especially where states want to reduce their dependence on the US dollar. In conjunction with structural factors such as the energy transition, increasing tensions in the global trading system, and the debate about the stability of state finances, UBS sees this official demand as a stable support for the gold market.
The investor side also remains in focus. UBS expects ETFs to continue to be an important interface between the financial market and physical gold. Increasing inflows into these products can directly increase the demand for physical metal, as many of these funds are physically secured. In an environment of falling interest rates and persistent uncertainty, institutional and private investors could increasingly turn to gold ETFs to diversify their portfolios.
Gold between Safe Haven and Interest Rate Turnaround – a Market in a State of Tension
The updated UBS forecast shows how strongly the gold market is currently influenced by macroeconomic and political factors. On the one hand, there are expectations of an interest rate turnaround in the USA, a tense geopolitical situation, and structural fiscal risks that make gold appear attractive as a hedging instrument. On the other hand, an unexpectedly tight monetary policy by the Federal Reserve or changes in the behavior of central banks could dampen the upward trend.
