UBS Sets $5,400 Long-Term Gold Target on Rate Cut, Weaker Dollar Outlook

UBS has issued a new long-term price target for gold, forecasting the precious metal could reach $5,400 per ounce by the end of September 2027. The bank's strategists attribute the bullish outlook to an anticipated environment of falling real interest rates, a weaker U.S. dollar, and persistent investment demand.

Bullish Long-Term Forecast

This new forecast extends the bank's projection horizon by a quarter, building on the assumption that slowing inflation will become a more dominant theme by 2027. UBS strategists believe this, combined with U.S. economic activity potentially remaining at or below trend, will pressure the dollar and create a favorable backdrop for gold. The bank maintained its existing forecast for the end of 2026, which remains at $4,600 per ounce.

According to UBS, three key conditions must be met for gold's rally to continue: a sustained weakening of the U.S. dollar, a decline in expected U.S. real interest rates, and consistently strong investor demand.

Demand Remains a Key Driver

Demand has already shown signs of strengthening, supporting current prices. Inflows into gold-backed ETFs have resumed, initially led by China and more recently joined by Europe. Central bank buying also remains a significant factor.

Key demand-side data includes:

Ad

• Central bank net purchases reached 51 metric tons in June, according to the World Gold Council.
• The People's Bank of China added 20 metric tons in July, its largest single-month increase since October 2023.

To support a price sustainably above the $5,000 mark, UBS estimates that quarterly investment demand would need to be around 500 metric tons.

Investment Outlook and Key Risks

The primary risk to this bullish forecast, as outlined by the bank, is a more hawkish Federal Reserve. A potential interest rate hike later this year could push real yields higher and strengthen the U.S. dollar, thereby weakening investor appetite for gold. In such a scenario, UBS noted that gold prices could fall to test a support level of $3,850 per ounce.

Despite this risk, strategists suggested that price pullbacks represent potential entry points for investors. In the bank's view, a correction to the $4,000 per ounce level would present a good opportunity to increase exposure to the precious metal.