Gold's Friday rebound has not cleared the way for a possible drop toward $4,000 an ounce. UBS sees ETF demand and central-bank buying supporting a longer-term rise to $5,200 by June 2027, even as higher US yields weigh on prices.
Higher US real yields and a stronger dollar could push gold back toward $4,000 an ounce before UBS's longer-term forecast of $5,200 by June 2027 comes into view. The bank sees investor demand and central-bank buying cushioning that pressure.
Spot gold closed near $4,195 on Friday, up 1.2% on the day. The rebound followed gains on Thursday, but interest-rate pressure remains behind the recent decline.
ETF buyers hold their ground
The sell-off has not reached every class of gold buyer. World Gold Council figures show physically backed gold exchange-traded funds attracted about $10 billion in September, even as gold fell 8.5% to $4,176 an ounce. ETF holdings rose by about 67 tonnes to a record 4,256 tonnes. UBS strategist Giovanni Staunovo says those holdings have remained resilient. Meanwhile, non-commercial investors have cut their net-long positions in gold futures and options.
September's inflows capped a record third quarter for gold ETFs. Funds received about $30.74 billion, while physical holdings increased by roughly 211.2 tonnes. Flows were positive across all regions, led by Europe and North America. North American ETFs attracted nearly $4 billion in September, equivalent to about 27.7 tonnes of gold. European funds added 21.7 tonnes to their holdings.
Yet the value of global gold ETF assets under management fell 7% in September to about $574 billion. The Council's figures show funds held more gold by weight even as the value of those assets declined during the month.
That split matters when futures selling picks up. Rising yields can make gold less attractive, while shrinking speculative positions add pressure. Those moves can outweigh investment flows into physically backed funds, helping explain why the latest price drop has not erased the support UBS sees from demand for physical gold.
UBS expects central banks to buy 750-1,000 metric tons of gold annually. Staunovo cites reserve diversification and concerns about public debt and debt-servicing costs. He also points to expected long-term weakness in the US dollar. Chinese buying and seasonal demand in India add to the bank's case for a stronger long-term outlook, though UBS does not present those factors as a guarantee of rising prices.
Banks disagree on the timing
UBS's forecast partly depends on a shift in interest-rate expectations. Market participants are pricing in slightly more than 75 basis points of Federal Reserve rate hikes through the end of 2027. UBS expects one more hike in 2026, followed by two 25-basis-point cuts in 2027. Lower expected returns on competing assets could reduce the opportunity cost of holding gold, which pays no interest.
Crédit Agricole is more bullish over the nearer horizon. It forecasts $5,000 an ounce for December 2026, $400 above UBS's target for the same month. The bank's forecast depends on central banks resuming purchases, particularly if the global energy shock continues to fade. It also sees renewed concern that fiscal pressures could limit the Federal Reserve's room to set policy.
UBS also uses interest-rate and currency assumptions in its Mexico peso outlook, though the gold forecast rests on a different mix of market forces.
US yields remain the near-term test
Staunovo's warning is that rising US real yields and a stronger US dollar make gold less attractive beside interest-bearing assets. Real yields measure returns after inflation. When they rise, investors may demand a stronger reason to hold an asset that generates no income. UBS says those conditions could leave gold exposed to another test of $4,000 an ounce.
Gold's sensitivity to yields can ease when buyers place more weight on diversification or protection from fiscal risks than on income. But that demand does not rule out short-term declines if investors reduce futures exposure, or if the dollar and real yields rise. UBS's near-term warning centers on a possible fall toward $4,000 an ounce.
