UBS said lower real interest rates are likely to revive investment demand for gold, arguing that the metal’s outlook remains supported by both cyclical and structural factors. The call comes as gold trades near record levels, with prices having climbed sharply over the past year on a combination of central bank accumulation, geopolitical risk and expectations of a more dovish Fed.

The bank tied its view to the Federal Reserve’s policy path, saying a hold through 2026 followed by renewed easing in 2027 would push real yields lower and weigh on the dollar. UBS said that combination has historically helped draw investment flows back into bullion. Gold, which pays no yield, tends to become more attractive relative to interest-bearing assets when real returns fall, reducing the opportunity cost of holding the metal.

The Swiss bank also explicitly framed weakness in gold as an opportunity to add exposure, saying any move toward $4,000 an ounce or below could be treated as a buying chance rather than a warning sign. That stance suggests UBS sees the medium-term trend as intact even if near-term dollar resilience limits immediate upside.

Inflation is expected to moderate gradually, according to UBS, allowing the Fed to keep rates unchanged through 2026 before resuming cuts in 2027. The bank said that shift toward lower policy-rate expectations should reduce real yields, put pressure on the dollar and support fresh investment demand for gold.

The dollar remains central to UBS’s case. The bank said the greenback could stay firm in the near term, but pointed to structural risks that could weigh on it later, including large US fiscal and external deficits and already elevated investor exposure to dollar assets. UBS said a weaker dollar has historically supported gold, and that any renewed move by investors to diversify away from the currency would likely benefit the metal further.

Central bank buying is another major pillar of support, UBS said, and one that is less sensitive to the rate cycle. The bank noted that official-sector demand can help stabilise the market even when private investment demand and jewellery consumption soften. This trend has been especially pronounced among emerging market central banks seeking to reduce dependence on the dollar in their reserves.

UBS said central banks bought around 290 metric tons of gold in the strong second quarter and projected full-year purchases in the 750 to 1,000 metric ton range. The bank said this buying is unlikely to drive prices sharply higher on its own, but it can help offset weaker demand elsewhere in the market.

Overall, UBS described its stance on gold as constructive through the cycle rather than aggressively bullish in the short term, saying falling real yields, a softer dollar and continued central bank accumulation remain the key supports. Investors watching for confirmation of this thesis will be looking to upcoming inflation prints, Fed communications and quarterly central bank gold purchase data.