UBS is treating dollar weakness as a structural theme rather than a short-term fluctuation, pointing to sustained flows into gold, commodities and selected currencies rather than a quick reversal. The bank says central bank reserve diversification, including another large gold purchase by the People's Bank of China, suggests official-sector demand could continue to support bullion even if speculative positioning changes. UBS also favors selective exposure to the British pound, Norwegian krone, New Zealand dollar and yuan rather than broad dollar shorts, indicating a more targeted approach to the trade. In the near term, the bank says tensions in the Middle East and higher oil prices could lend the dollar some support, meaning the broader depreciation view may face periodic interruptions.

UBS says de-dollarization is a trend to build around, not trade around, with gold as the biggest beneficiary.

The DXY dollar index has fallen 2.4% over the past month amid renewed concerns about the US fiscal outlook, according to UBS. The bank expects a gradual dollar depreciation trend to continue over the medium to long term, even if near-term support emerges from geopolitical tensions and higher energy prices. UBS cites US fiscal concerns, trade policy uncertainty and reserve diversification as the main forces behind the trend.

Gold has risen about 15% this month, and UBS forecasts the metal reaching $5,400 an ounce over the next 12 months. The bank says further gains could be supported by renewed inflows into gold exchange-traded funds, robust central bank buying and expectations that markets will scale back Federal Reserve rate hike bets. UBS highlighted that the People's Bank of China added 20 metric tons to its gold reserves in July, its largest monthly increase since October 2023. In practice, that means the bank is framing gold less as a tactical hedge and more as a core asset within a broader reserve and portfolio diversification theme.

Beyond bullion, UBS says broad commodities offer a differentiated source of portfolio return and can also serve as a hedge if higher inflation expectations weigh on equities and bonds. The bank expects oil demand to keep rising, especially in emerging markets, while industrial metals should benefit from long-term demand linked to electrification, the energy transition and the global buildout of AI infrastructure. UBS also points to the possibility that El Niño-related weather disruption could constrain agricultural supplies and lift crop prices, underscoring that commodity exposure can be influenced by both macro policy shifts and physical supply conditions.

On currencies, UBS sees scope for the euro to recover more broadly against the dollar as incoming data allows markets to price in no further Fed hikes this year and possible rate cuts in 2027. The bank also expects an additional European Central Bank rate increase in September, which it says could help push EURUSD toward 1.20 over time. UBS maintains a Neutral stance on the euro, but says the current backdrop favors selective exposure to higher-yielding currencies including the British pound and Norwegian krone. It also favors the New Zealand dollar, citing a hawkish policy bias from the country's central bank, and the Chinese yuan, supported by strong export-driven currency inflows. UBS said select emerging market currencies may also offer carry opportunities. That selective setup highlights the bank's view that the de-dollarization theme is showing up unevenly across assets, rather than through a single broad-based move.

UBS concludes that exposure to gold, broad commodities and select currencies may help support returns and manage portfolio risk as the long-term shift away from the dollar continues. The bank added that an actively managed approach to commodities can help investors navigate shifting supply conditions, geopolitical risks and changes in market leadership.