UBS: Maintains a positive mid-term outlook for gold; considers a pullback to around $4000 as an opportunity to increase holdings

(1) The UBS Wealth Management Chief Investment Office released an institutional view on October 12, maintaining a positive medium-term outlook for gold. As market expectations for further Fed rate hikes are lowered, gold prices are expected to regain momentum towards the end of the year and continue this trend through 2027. (2) The simultaneous rise in US real yields and the US dollar exchange rate has increased the opportunity cost of holding gold, leading to recent weakness in gold prices. However, despite sharply rising yields, gold has demonstrated significant resilience. (3) Gold’s sensitivity to real interest rates has diminished, indicating that the cushion provided by structural demand is stronger than in previous cycles. (4) UBS expects central bank annual gold purchases to range from 750 to 1,000 tons, providing key structural support for gold prices. (5) In the short term, gold prices may once again test the support level around USD 4,000 per ounce, while structural demand for buying on dips is expected to form a bottom at this level. (6) As the market reassesses the scope for further Fed tightening, a decline in real yields should drive a rebound in gold prices. UBS remains optimistic on the long-term investment logic for gold, and a pullback to near USD 4,000 is seen as an opportunity to increase positions. (7) For investors who prefer physical assets, allocating a mid-single-digit percentage of gold in a well-diversified portfolio is considered appropriate.