UBS Cuts Gold Forecasts as Delayed Fed Rate Cuts Pressure Outlook

UBS has lowered its gold price forecasts by $300 to $900 per ounce, pointing to stronger U.S. economic data and a delayed Federal Reserve easing timeline as the main reasons behind the revision.

The bank now expects Fed rate cuts to be pushed back to 2027, creating fresh pressure on gold prices as real yields remain elevated.

Strong U.S. Data Weighs on Gold

UBS strategists Dominic Schnider, Giovanni Staunovo, and Wayne Gordon said gold has come under renewed pressure following resilient U.S. labor market data.

Stronger employment figures and higher real yields have pushed markets to consider the possibility of a Fed rate hike later this year. This shift has made gold less attractive in the short term, especially as the metal does not offer yield.

According to UBS, momentum indicators suggest gold could continue moving toward the $3,850 to $4,000 per ounce range in the near term.

Iran Tensions Fail to Spark Strong Gold Demand

UBS also noted that gold’s muted reaction to the escalation between the United States and Iran encouraged some investors to take profits.

Normally, geopolitical tension can increase demand for safe-haven assets such as gold. However, the limited price response has left the metal more exposed to traditional macroeconomic drivers, including real yields and the U.S. dollar.

ETF holdings have also recorded modest outflows, showing that some investors have reduced exposure. Still, UBS said market positioning is not extreme, meaning there is room for renewed investor demand if conditions improve.

UBS Remains Positive on Gold Over 12 Months

Despite cutting its near-term forecasts, UBS remains constructive on gold over the next 12 months.

The bank’s base case assumes that the Federal Reserve will cut interest rates by up to 50 basis points in 2027. UBS also expects U.S. economic growth to stay below trend, which could eventually support gold prices.

The bank also sees potential for renewed U.S. dollar weakness due to large fiscal and external deficits. A weaker dollar often supports gold because it makes the metal cheaper for international buyers.

Central Bank Buying Still Supports Gold

Central bank demand remains one of the strongest pillars behind UBS’s positive long-term gold outlook.

The bank expects annual central bank gold purchases to remain between 750 and 1,000 metric tons. Preliminary May data showed that the People’s Bank of China added 10 metric tons of gold, while Uzbekistan’s central bank bought nearly 9 metric tons.

This continued buying trend suggests that official-sector demand remains strong, even as short-term market pressure weighs on prices.

Price Weakness May Create Buying Opportunities

UBS concluded that any move toward the $3,850 to $4,000 per ounce range could eventually become an opportunity to build gold exposure.

Rather than viewing short-term weakness as a reason to exit the market, the bank sees potential pullbacks as possible entry points for investors with a longer-term view.