Investing.com -- Gold prices could reach $5,900 per ounce by late 2026, driven by U.S. midterm election uncertainty, tariff negotiations, a weaker dollar and declining real interest rates, according to UBS.

In a note reviewing World Gold Council first-quarter data, UBS strategists Wayne Gordon, Giovanni Staunovo and Dominic Schnider said structural demand trends remain intact despite heightened volatility following the onset of the Iran War.

Gold averaged $4,873 per ounce in the first quarter, peaking above $5,500 per ounce before pulling back.

UBS said investment demand is now the primary driver of buying activity, with bar and coin purchases rising 42% to 474 metric tons, largely fueled by Asian markets.

Central banks increased purchases 3% to 244 metric tons, while exchange-traded fund flows remained net positive at 62 metric tons despite late-quarter outflows, particularly in the U.S.

Jewelry demand fell 23% to 300 metric tons, though total jewelry expenditure rose more than 30%. UBS maintained its 2026 demand forecast at 900 metric tons.

The bank said near-term gains may be limited by elevated real yields and a stronger dollar stemming from the oil shock, but characterized recent price weakness as temporary.

"Uncertainty surrounding upcoming midterm elections and tariff negotiations, expectations of a weaker US dollar over time, and declining real interest rates (as the Fed cuts) will likely reinvigorate ETF inflows, alongside continued central bank demand," UBS wrote.

"Together, we believe these drivers could push prices toward USD 5,900/oz by late 2026."

UBS said it favors adding long positions on dips into the $4,400–$4,600 per ounce range.