UBS Bank maintains its positive outlook on gold prices despite the sharp decline witnessed by the precious metal, falling below the level of $4,000 per ounce. The Swiss bank is betting on continued central bank purchases and investment fund flows to push prices towards the $5,000 barrier during 2027.
This position comes after gold fell by about 29% compared to its historical peak of about $5,595 recorded in January 2026, thus recording losses of more than 7% since the beginning of the year.
Price forecasts for 2027
UBS expects gold to rise to the level of $5,000 or more during the year 2027, representing an increase of approximately 25% compared to the level of $4,000, before reaching $5,400 by September of the same year. The bank considers that the decline in prices near the $4,000 level represents an investment opportunity to increase exposure to the metal, supported by continued demand from central banks and investment funds. However, gold reaching $5,400 will not be enough to regain its historical peak recorded in January, which reflects the depth of the correction wave that the metal experienced during the year.
On the other hand, these bullish expectations face a major obstacle, which is the continuation of US interest rates at high levels, after the Federal Reserve kept the interest range between 3.75% and 4% at its last meeting. Two members of the Monetary Policy Committee called for an immediate increase in interest rates by 25 basis points, in light of the acceleration of annual inflation to 3.7% in September, and the rise in the personal consumption expenditures index to 3.6%.
The Swiss Bank expects to raise interest rates twice; The first in December 2026 and the second in March 2027, which may put pressure on gold prices in the short term as a result of the rise in bond yields and the strengthening of the dollar, especially since gold is an asset that does not generate a return, which makes high interest rates reduce its attractiveness in favor of monetary instruments and bonds.
The role of central banks and institutional support
The bullish outlook for UBS is based on the strength of institutional demand. Central banks purchased about 289 tons of gold during the second quarter, recording an annual increase of 62%. Gold-backed exchange-traded funds also attracted record inflows of $31 billion during the third quarter, driven by escalating concerns about government debt, the decline in the purchasing power of currencies, and the desire to diversify reserves away from the dollar.
UBS is not out of breath in its optimistic expectations, as Goldman Sachs aims for gold to reach $5,400 by the end of 2027, while JP Morgan adopts more optimistic estimates at $6,300. On the other hand, a Reuters poll that included 30 analysts and traders showed that the average expected price of gold in 2027 is $4,650, which is a more conservative level compared to the estimates of major banks.
The bullish scenario remains subject to the continuation of central bank purchases and fund flows, in addition to a slowdown in inflation rates and a decline in Treasury bond and dollar yields, while the continuation of tight monetary policies may postpone gold’s recovery, regardless of the continuation of geopolitical and financial factors supporting demand.
