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After the gold price jumped significantly over the past week, UBS Global Wealth Management, together with other wealth managers, discuss the outlook and the benefits of including gold in investors\u2019 portfolios.\t \t \t \t \t \t \t \t \t <\/p>\n
\n After gold rose to its highest level in seven weeks, UBS
\n Global Wealth Management<\/a> chief investment office believes
\n that the medium- to longer-term case for holding the yellow metal
\n remains strong, supported by lower real rates, a softer dollar,
\n and central bank buying.
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\n Gold climbed above $4,250 per ounce\u00a0for the first time since
\n June, breaking above its recent trading range of between
\n $4,000\/oz and $4,100\/oz. Reported Chinese institutional buying
\n and inflows into exchange-traded funds\u00a0have supported the
\n latest price movement, while recent joint government efforts by
\n the US and Japan to stabilize the yen could have helped reduce
\n the risk of a sell-off in US Treasuries, according to UBS GWM
\n CIO.
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\n However, near-term risks remain, especially if US data stay firm,
\n oil prices keep inflation concerns alive, or markets continue to
\n price in a more hawkish US Federal Reserve rate path, the wealth
\n manager said in a report.
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\n But while the immediate backdrop could remain volatile, UBS
\n thinks the medium- to long-term case for gold appears to
\n be\u00a0supported by several durable drivers. The firm expects
\n gold prices to rise toward $5,000\/oz in the first half of 2027.
\n UBS continues to see a role for\u00a0gold\u00a0in diversified
\n portfolios.
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\n Arun Sai, senior multi-asset strategist at Pictet Asset
\n Management<\/a> has also upgraded from
\n neutral to overweight<\/a>\u00a0as investor demand is
\n strengthening and emerging market central banks continue to
\n increase reserves. He sees further upside for gold\u00a0as real
\n interest rates gradually ease, eroding the opportunity cost of
\n holding a non-yielding asset.
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\n UBS said lower real rates should\u00a0revive investment demand
\n for gold. The metal\u00a0does not pay income and\u00a0higher real
\n yields increase the opportunity cost of holding it. But
\n UBS\u00a0expects inflation to gradually moderate, allowing
\n the\u00a0Fed\u00a0to hold interest rates steady in
\n 2026\u00a0before resuming easing in 2027. \u201cThis should create a
\n more favorable backdrop for gold, as a shift toward lower
\n policy-rate expectations would likely reduce real yields, weigh
\n on the US dollar, and help boost investment demand for gold,\u201d UBS
\n said.
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\n The US dollar could stay resilient in the near term, but
\n structural challenges including large US fiscal and external
\n deficits and already elevated investor allocations to dollar
\n assets mean that there is scope for renewed weakness, UBS said. A
\n weaker dollar has historically boosted gold, while a renewed
\n focus on diversification away from the dollar should benefit the
\n precious metal.
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\n Central bank support
\n Central bank demand has also remained an important pillar of
\n support, even when private investment demand has been lackluster.
\n UBS expects annual central bank purchases to remain elevated,
\n supported by a long-term desire to reduce exposure to dollar
\n assets. Following a strong second quarter, when central banks
\n bought 289 metric tons of gold, the Swiss bank\u00a0estimates
\n full-year purchases in the 750 to 1,000 metric ton range this
\n year. While these flows might not be enough to drive prices
\n sharply higher on their own, they can help stabilize the market
\n and offset weaker areas such as jewelry demand, the firm added.
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