【TMGM Financial Recap】Speculative Funds Retreat, Long-Term Buying Remains Intact; UBS Is Optimistic About Gold Holding $4,000!

Despite the pressure on gold despite a stronger dollar and rising US real interest rates, UBS remains optimistic about the medium- to long-term outlook for gold, expecting support around $4,000 per ounce and rising to $5,400 by September 2027. The bank believes that the divergence between short-term speculative reductions and medium- to long-term allocation needs is key to understanding current gold price trends.

UBS pointed out that rising real interest rates and a strong US dollar have increased the opportunity cost of holding interest-free gold, and recently, non-commercial traders have reduced net long positions in gold futures and options, further increasing downward pressure on prices. However, gold exchange-traded fund (ETF) holdings remain resilient, with continued inflows in recent weeks, indicating that some investors have not simultaneously exited the gold market.

This divergence means that speculative funds reducing their positions may push down short-term gold prices, but it does not necessarily mean a reversal in medium- to long-term allocation demand. Gold has shown greater resilience in the face of a sharp rise in U.S. real yields than before, reflecting that structural demand may be partially offsetting interest rate pressure.

However, real interest rates and the US dollar remain important variables affecting short-term trends, and further declines in gold prices cannot be ruled out.

UBS expects gold prices to find support near $4,000 per ounce. The bank's forecast path is to rise to $4,600 in December 2026, reach $5,000 in March 2027, $5,200 in June, and reach $5,400 in September. One factor supporting this forecast is UBS's judgment on global central bank gold purchases. The bank expects global central banks' annual gold purchases to remain between 750 and 1,000 tons. Central banks' continued gold holdings help diversify reserve assets and provide a more stable source of demand for gold prices.

Gold's sensitivity to changes in real interest rates may be diminishing. Besides interest rate factors, some investors' concerns about public debt, fiscal risks, and the long-term trend of the dollar may also increase gold's appeal as a reserve asset and portfolio allocation tool. This does not mean interest rates are no longer important, but rather that gold prices may increasingly be influenced by structural demand.

Market Insight:

Market pricing shows investors expect the Fed to raise rates by slightly more than 75 basis points by the end of 2027; The Fed will raise rates once more in 2026 and two more in 2027, each by 25 basis points. If future interest rate expectations align with UBS's judgment, declining real rates could reduce the opportunity cost of holding gold, supporting gold prices. Conversely, if high interest rates persist longer than expected and the dollar and real yields continue to strengthen, gold prices may remain under pressure, and support near $4,000 will also be tested.