(Reuters) -UBS raised on Friday its gold price forecast by $300 to $3,800 per ounce by the end of 2025, and by $200 to $3,900 by mid-2026, citing anticipated Federal Reserve easing and U.S. dollar weakness linked to rate cuts and geopolitical risks.
The Swiss bank also revised its estimate for gold exchange-traded fund (ETF) holdings, projecting levels to exceed 3,900 metric tons by the end of 2025, approaching the previous record of 3,915 tons set in October 2020.
"We maintain an Attractive view on
gold and stay long the metal in our global asset allocation. Moreover, our analysis suggests a mid-single-digit percentage allocation to gold is optimal," UBS said in a note.
The bank highlighted geopolitical concerns and policy differences between the U.S. administration and the Federal Reserve as key factors boosting gold's appeal, along with U.S. President Donald Trump's stance favouring lower interest rates.
UBS expects central bank purchases of gold to remain robust at around 900-950 tons this year, or slightly below last year's near-record purchases of just above 1,000 tons.
"The key risk for gold is if the Fed is forced to raise rates due to inflation-related upside surprises," UBS added.
Non-yielding bullion, often considered a safe-haven asset during periods of economic and geopolitical uncertainty and known to perform well in low-interest-rate environments, hit a record high of $3,673.95 on Tuesday and has gained more than 39% year-to-date.
(Reporting by Anmol Choubey in Bengaluru; Editing by Jacqueline Wong and Rashmi Aich)
