FX.co ★ Analysts advise buying gold during collapse while central banks prop up market

Swiss bank UBS sharply downgraded its forecast for gold, lowering expectations by $300–$900 per ounce. Analysts attribute the revision to a “double whammy”: the unexpectedly resilient US economy and the Federal Reserve’s cycle of monetary easing anticipated in 2027.

In their report, analysts Dominic Schnider, Giovanni Staunovo, and Wayne Gordon note that the precious metal is under heavy pressure. A strong US labor market and rising real yields force traders to revise their portfolios and price in the likelihood of rate hikes this year. As a result, gold prices are likely to gravitate toward the range between $3,850 and $4,000 per ounce in the near term.

Geopolitics also played a role. The market’s surprisingly muted reaction to the escalation between the US and Iran prompted investors to take partial profits. Gold is once again driven by classic macroeconomic factors: real interest rates and the US dollar. Against this backdrop, gold ETFs have recorded moderate outflows.

Despite the current correction, UBS remains bullish on the precious metal over a 12‑month horizon. The bank’s base case assumes the Federal Reserve will cut interest rates by 50 basis points in 2027 as economic growth slows down. Additional support for gold should come from an eventual weakening of the dollar amid swollen US fiscal and external deficits.

The main market driver remains central banks’ policies worldwide. UBS expects regulators to continue steady annual purchases of 750–1,000 metric tonnes of gold. Preliminary data shows that the People’s Bank of China added about 10 tonnes to its reserves in May, and the central bank of Uzbekistan bought roughly 9 tonnes. Therefore, UBS analysts view a pullback to $3,850–$4,000 as a great opportunity to open long positions, not a reason to panic.