UBS sees gold rising to $5,000/oz by first half of 2027

Investing.com - Gold has broken above $4,250/oz for the first time since June, clearing the $4,000–$4,100/oz trading range that had contained prices. In support of rising gold prices, UBS strategists have reiterated their forecast the metal will reach $5,000/oz by the first half of 2027.

UBS attributes the latest push higher to reported Chinese institutional buying and ETF inflows. The bank also notes that recent joint U.S.-Japan efforts to stabilize the yen may have reduced the risk of a sell-off in U.S. Treasuries, providing a secondary tailwind for the precious metal.

"But while the immediate backdrop may remain volatile, the medium- to long-term case for gold still looks supported by several durable drivers," UBS wrote. "We expect gold prices to rise toward USD 5,000/oz in the first half of 2027."

UBS's bullish thesis rests on three structural pillars. First, the bank expects real yields to decline as monetary policy eventually eases. "Gold does not pay income, so higher real yields increase the opportunity cost of holding it," UBS noted.

"But we expect inflation to gradually moderate, allowing the Fed to hold interest rates steady this year before resuming easing in 2027." That expected Fed pivot would reduce the opportunity cost of holding non-yielding gold and revive broader investment demand.

The second pillar is dollar weakness. UBS argues that structural challenges, including large U.S. fiscal and external deficits and already elevated investor allocations to dollar assets, create scope for renewed greenback softness over the medium term.

"A weaker dollar has historically been a powerful tailwind for gold, while a renewed focus on diversification away from the U.S. dollar should benefit the precious metal," the bank said.

The third pillar is central bank demand, which UBS describes as a durable price floor. "Central bank demand has remained an important pillar of support, even when private investment demand has been lackluster," signaling that sovereign buyers have insulated the market from periods of weak retail and institutional interest.

UBS is candid about near-term risks, cautioning that the path to $5,000/oz will not be smooth. "Near-term risks remain, especially if U.S. data stay firm, oil prices keep inflation concerns alive, or markets continue to price in a more hawkish Federal Reserve rate path," the bank said.

Persistent inflation or a resilient U.S. economy could delay the Fed's anticipated pivot, keeping real yields elevated and pressuring gold in the short run.

The bank's $5,000/oz target implies roughly 18% upside from the recent break above $4,250/oz.

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