Gold continues its upward trend. According to UBS Global Wealth Management, the precious metal could climb towards $4,700 per troy ounce given ongoing political and trade policy uncertainty, falling real interest rates, a weaker US dollar, and rising government debt.
The experts point out that gold has gained more than 60% since the beginning of the year, outperforming most asset classes. Short-term fluctuations are possible, but the structural drivers remain intact. In parallel, mining stocks are also coming into focus, as their free cash flows could increase disproportionately in a rising price environment.
Gold on the Rise: Macro Drivers at a Glance
The recent momentum in gold stems from a variety of macroeconomic factors. Resurgent trade conflicts weigh on risk sentiment, while fiscal policy disputes in the US – including a government shutdown with no end in sight – act as a source of uncertainty. Additionally, geopolitical tensions are rising in several regions. In such phases, investors typically seek refuge in assets considered robust, such as the yellow metal. In futures trading (e.g.,
Real Interest Rates, US Dollar, and the Role of Central Banks
A core argument from UBS: Real yields in the US could slip into negative territory due to Federal Reserve interest rate cuts amidst persistent inflation. Negative real interest rates reduce the opportunity cost of holding gold, as gold pays no ongoing returns. At the same time, a weakening US dollar typically lowers purchasing barriers for investors outside the dollar area, potentially triggering additional demand. Another component is the sustained buying interest from central banks. Many central banks have been diversifying their reserves for some time – a process that structurally supports the gold market and can reduce price sensitivity to individual economic data. This combination of monetary policy, currency development, and sovereign demand forms the backdrop for the positive framework outlined by UBS.
Record Inflows into Gold ETFs and Robust Overall Demand
In addition to central banks, capital flows from institutional and private investors also contribute to the market situation. According to the World Gold Council, globally investing gold ETFs recorded inflows of approximately $17 billion in September; over the three months to the end of September, they totaled $26 billion – the strongest quarter since records began. Such ETF inflows act as a direct lever on physical demand, as the funds increase their holdings accordingly. In combination with central bank demand, UBS estimates global gold demand for the current year at approximately 4,850 tonnes – the highest value since 2011. This structural foundation explains why interim pullbacks have so far been interpreted more as breathing pauses than as trend reversals. Furthermore, the low correlation of gold with equities and bonds makes the precious metal a component for many portfolios that can smooth overall risk – an assessment that UBS emphasizes in its market outlook.
Outlook: Price Targets, Volatility, and Mining Stocks
In the so-called upside scenario, UBS estimates the potential for the gold spot price at up to $4,700 per ounce. Crucially, this depends on whether the aforementioned drivers – negative real interest rates, a weaker dollar, sustained inflows, and geopolitical risks – converge. At the same time, the bank points to potential interim corrections: such a strong annual performance increases the likelihood of rising volatility. For stocks in the gold mining sector: rising prices often have a disproportionate impact on margins and cash flows, which can influence the share price development of individual producers.
UBS argues that selected mining stocks could benefit from this constellation in the coming six months. Regardless, the message remains sober: gold is primarily seen as a diversification component, whose role is particularly evident during periods of market stress and political uncertainty. At the start of the week, price developments underscored this narrative – the precious metal began firmly and largely recouped Friday’s losses.
Conclusion: The gold market is currently characterized by a rare confluence of monetary, currency, and geopolitical factors. Should real interest rates indeed continue to fall and the US dollar weaken, inflows from ETFs and central bank purchases could further support demand. Under these conditions, UBS considers a push towards $4,700 per ounce possible – with corresponding tailwinds for many listed gold producers.
