Strong Dollar Dampens Gold Demand; UBS Lowers 2026 Forecast

Swiss bank UBS has revised its gold price forecast downwards, citing the impact of high interest rates and a robust U.S. dollar. The bank now projects the price of an ounce of gold to be $5,500 by the end of 2026, a reduction from its previous estimate of $5,900.

Analysts Dominic Schnider and Wayne Gordon highlighted that elevated U.S. bond yields and the strong dollar are dampening investor appetite for gold. They explained that in an environment of high real interest rates, gold becomes less attractive as it offers no yield, leading to a noticeable slowdown in demand, particularly in ETF and futures markets.

However, UBS maintains that the long-term upward trend for gold is not over. The bank anticipates that gold could finish the current year approximately $1,000 higher than its current levels. They suggest that a more neutral monetary policy in 2027 could weaken support for the U.S. dollar, potentially prompting investors to shift back towards gold.

While acknowledging the short-term headwinds from interest rates, UBS analysts believe that factors such as inflation, rising public debt, and global uncertainties will continue to support gold prices in the long run. Ongoing gold purchases by central banks, strong jewelry demand in Asia, and investors seeking alternatives to the U.S. dollar are identified as key supporting elements. The report concludes that gold will remain a crucial hedge in investment portfolios, especially if geopolitical risks persist.