Gold has fallen sharply from its January peak, but UBS believes that this pullback is temporary and expects the precious metal to rally toward $5,500 per ounce by the end of 2026, supported by strong investor demand, sustained central-bank buying and a weaker US dollar later in the year.

In its latest report, UBS said gold (as of early-June) has declined about 20% below its all-time high reached in January. The brokerage attributed the correction to higher energy prices, US dollar strength and concerns that US interest rates may stay elevated for longer than previously expected.

“We believe that recent weakness in gold prices is temporary, and we expect the yellow metal to rise toward $5,500/oz by the end of the year,” UBS says.

Gold came under pressure as yields and the dollar moved higher

UBS said higher energy prices linked to the ongoing Middle East conflict have helped support the US dollar and push up real yields. Both developments have weighed on gold prices in recent months.

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The brokerage said tighter central-bank policy increases the opportunity cost of holding non-yielding assets such as gold. A stronger US dollar also raises the metal’s price for buyers using other currencies, which can dampen international demand.

Gold remained under pressure last week as concerns around Federal Reserve tightening intensified. UBS said the metal had slipped into negative territory for 2026 after gaining nearly 25% and reaching a record high in January.

UBS still sees prices moving higher

Despite the recent correction, UBS said the drivers behind gold’s rally remain intact. The brokerage pointed to strong demand during the first three months of the year, according to World Gold Council data, alongside continued central-bank purchases.

UBS also said elevated global debt levels, persistent US fiscal deficits and ongoing reserve diversification by central banks support gold over the medium term.

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According to the brokerage, those structural drivers have not changed despite the recent weakness in prices.

Weaker dollar could support the next leg higher

UBSexpects a weaker US dollar later this year and believes that this  development is likely to  support gold prices. The brokerage also pointed to political uncertainty and fiscal deficits as additional triggerssupporting the demand for the metal.

The report argues that the current weakness reflects short-term macro pressure rather than a change in the longer-term investment case.

Real-yield relationship has returned

UBS said the inverse relationship between gold and US real yields has re-emerged in recent months.

The brokerage said the correlation between two-year US Treasury yields and gold now stands near -0.6, reversing the slightly positive relationship seen earlier in 2026. According to UBS, investors are once again focusing on the opportunity cost of holding gold as real rates remain elevated.

UBS still sees gold as a portfolio hedge

UBS said it continues to view gold as a strategic hedge and portfolio diversifier. The brokerage recommends a mid-single-digit allocation for investors who want exposure to the metal and expects prices to end the year around $5,500 per ounce.

The firm added that structural trends, including high government debt levels and diversification efforts by central banks and global investors, should continue to support gold over the longer term.

Conclusion

UBS said gold’s retreat from its January record high looks like a temporary setback rather than the end of the rally. While higher energy prices, a stronger US dollar and elevated real yields have weighed on prices, the brokerage said strong investor demand, sustained central-bank buying, fiscal concerns and reserve diversification continue to support the metal.

Disclaimer: The gold price forecasts, target estimates, and asset allocation recommendations from UBS outlined in this report are for informational and educational purposes only. They do not constitute a direct offer, solicitation, or investment advice to buy, sell, or trade gold or related financial instruments. Commodity investments are subject to significant market risks, including global geopolitical events, central bank policy shifts, and currency fluctuations. Readers are strongly advised to conduct independent analysis and consult a SEBI-registered investment advisor or a qualified financial consultant before making capital allocations or portfolio adjustments based on these projections.

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