Gold's recent slide and UBS's outlook
Gold has lost in excess of 16% of its value since U.S. and Israeli strikes on Iran at the end of February. In a client note, UBS said that the decline has been driven in part by market concerns that higher energy prices could force the Federal Reserve and other central banks to tighten policy, increasing the opportunity cost of holding non-yielding assets such as the precious metal.
Yields, correlation and price forecasts
Two-year U.S. Treasury yields have climbed by close to 60 basis points since the onset of the conflict, and UBS highlighted that the correlation between those short-term yields and gold has swung to around -0.6. That represents a marked reversal from a slightly positive correlation observed earlier in 2026.
The Swiss bank trimmed its year-end gold forecast to $5,500 per ounce from a prior $5,900, yet still expects prices to recover from current levels and to surpass the previous record high of roughly $5,400 per ounce.
Monetary policy path assumed by UBS
UBS set out a base case in which the Federal Reserve begins to ease policy later in the year, penciling in a rate cut at the Fed's December policy meeting followed by further easing in March 2027. The bank said that as the year progresses, evidence that higher energy prices have not produced large second-round effects would allow the Fed to adopt a more dovish tone.
Central bank demand as a support
The report also pointed to central bank buying as a support under gold prices. UBS projected that central banks would purchase between 200 and 250 metric tons in the second quarter, which the bank expects to help provide a floor to the market.
Outlook summary
Overall, UBS said it "remains positive on the outlook for gold," citing factors it views as medium-term supports: reserve diversification, elevated global debt burdens and the prospect of easier monetary policy. Those elements underpin the bank's expectation that gold will recover and move above its prior record.
Note: This article reflects the information and projections presented in the UBS client note described above. It does not introduce any additional forecasts or data beyond that communication.