UBS updated its gold price forecasts Friday, now predicting the precious metal will rally to $3,500 in 2025.
“The case for adding gold allocations has become more compelling than ever in this environment of escalating tariff uncertainty, weaker growth, higher inflation and lingering geopolitical risks,” UBS strategist Joni Teves said in a note.
The changing global trade, economic, and geopolitical landscape is reinforcing the role of gold as a safer investment haven, Teves added.
He expects the bullion’s rally to extend into 2026 and the prices to settle at elevated levels over the longer term.
Despite gold’s rally this year and the prevailing bullish market consensus, Teves said its tracking indicators for positioning suggest there is still potential for growth in gold investments.
The strategist notes that investors have raised their gold positions over the past quarter, particularly in terms of the U.S. dollar (USD) value.
The current levels of gold held in futures and exchange-traded funds (ETFs), relative to funds’ assets, are now comparable to those seen during the COVID pandemic, although they remain below the peak observed after the Global Financial Crisis (GFC).
“In the current macro environment, we think the ratio of gold positions to total funds’ assets has the potential to exceed the levels reached in 2020, though may not necessarily get to the peak in 2012/2013,” Teves continued.
UBS believes the demand for gold will come from different market segments, including the official sector, long-term asset managers, macro funds, private wealth, and retail investors.
On the supply side, the bank forecasts that mine supply growth will be limited and scrap supply will be restrained due to the bullish outlook for gold.
Teves admits that further price gains and the possibility of economic distress selling in a weaker growth environment could lead to an increase in scrap supply, however, this is unlikely to hinder gold’s upward trajectory.
He also warns that the combination of increased demand and the limited response from supply could lead to liquidity issues in the market, potentially resulting in exaggerated price movements, particularly given the current volatility in global markets.
