UBS is praising that the price of gold is expected to challenge 5,000 US dollars in the first half of next year. The decline in real interest rates and the central bank's gold purchases will be the backbone

The Zhitong Finance App learned that UBS strategists said in the latest report released on Thursday that lower real interest rates will drive investors back to the gold market, while the weak US dollar and the central bank's strong demand for gold purchases will jointly push the price of gold towards the 5,000 US dollars/ounce mark in the first half of next year.

UBS pointed out that the decline in real interest rates is expected to reignite the market's demand for gold investment. The bank believes that inflation will gradually decline moderately, enabling the Federal Reserve to keep interest rates unchanged this year and restart the easing cycle in 2027. “This should create a more favorable macro context for gold — a shift in policy interest rate expectations will depress real yields, put pressure on the dollar, and boost demand for gold investment.”

UBS believes that the US dollar may remain resilient in the short term, but structural challenges such as high US fiscal and external deficits and high investors' allocation of US dollar assets “mean that there is room for the dollar to weaken again.” The report reads: “Historically, the weakening of the US dollar has always been a strong tailwind for gold, and the market's renewed focus on 'de-dollarizing' allocations will also benefit this precious metal.”

At the same time, the central bank's demand for capital purchases “has always been an important support pillar, even during periods when demand for private investment is sluggish.” UBS expects “the central bank's annual gold purchase volume will continue to be high, driven by the desire to reduce its exposure to US dollar assets over a long period of time.”

“Although the short-term macro environment may still fluctuate, the medium- to long-term bullish logic for gold is still supported by a number of enduring drivers,” UBS said. “We expect the price of gold to rise to 5,000 US dollars/ounce in the first half of 2027.”

On Thursday, the price of gold futures fell, and investors chose to make a profit after the gold price hit a two-month high. The US inflation data released earlier is in line with expectations, further weakening the market's expectations that the Federal Reserve will raise interest rates next month.

Gold futures on the New York Mercantile Exchange (Comex) recently fell 1% in August to close at 4,363.60 US dollars/ounce, ending the previous four-day upward trend. Recently, in August, silver futures also fell 1% to close at US$64.873 per ounce.