Investing.com -- Gold’s sharp pullback has raised questions over whether the metal can recover its footing, but analysts at UBS say the recent weakness is likely temporary.

The bank notes that gold, which had been “up as much as 25% in January,” has now “erased virtually all of its 2026 gains.”

The metal is up this year; however, it has dropped close to 11% in the last month.

Although the sell-off appears counterintuitive given heightened geopolitical uncertainty, UBS said the move is consistent with history.

“Gold does not always rally during periods of conflict, particularly in the early stages. The economic context is crucial,” the bank wrote.

In this case, rising energy prices have led markets to price in tighter monetary policy, increasing the opportunity cost of holding non-yielding assets.

UBS highlighted that markets have shifted dramatically, moving from expectations of “two and a half Fed rate cuts in 2026, to no further easing this year, and even a small probability of a hike.”

Similarly, bond markets are pricing multiple rate hikes by the European Central Bank and Bank of England.

UBS argued this reaction is excessive, noting the potential drag on growth from higher energy prices. The bank still expects Federal Reserve easing this year and a revival in gold demand as the market’s flight-to-liquidity phase fades.

“Our view is that the decline in gold is likely to be relatively short-lived. While the timing is hard to pinpoint, we do expect gold to rebound and forecast the precious metal to climb to USD 6,200 an ounce by the end of June, scaling back to USD 5,900/oz in early 2027, from around USD 4,500/oz at present,” UBS concluded.