UBS analysts indicate that the current correction in the gold market is temporary, and gold prices are still on track to reach $4,200 per ounce. In an optimistic scenario, if geopolitical or market risks escalate, prices could even climb to $4,700 per ounce.
In a research report released Monday, UBS stated, "The long-awaited correction in the market has temporarily subsided." The report added, "Aside from technical factors, we have found no fundamental support for this sell-off."
The Swiss banking giant noted that "weakening price momentum triggered a second round of declines in futures positions," but emphasized that underlying demand for gold remains strong.
UBS analysts also cited the World Gold Council's (WGC) "Third Quarter Gold Demand Trends report," which confirmed that "gold demand from central banks and individual investors was strong and continues to rise."
They wrote in the report: "Central banks have purchased 634 tons of gold so far this year, which is lower than the same period last year, but fourth-quarter purchases are gradually increasing, in line with our forecast of 900-950 tons for the entire year of 2025."
Data showing gold ETF inflows reaching 222 tons and demand for gold bars and coins exceeding 300 tons for the fourth consecutive quarter indicates a significant increase in investor interest in gold. UBS points out that "jewelry demand was not as weak as expected."
"We tend to buy gold on dips," analysts say, adding that they still believe investors' "allocation to gold is too low." UBS advises investors to allocate a moderate single-digit percentage of gold assets in their investment portfolios.
On October 20, Sagar Khandelwal, a strategist at UBS Global Wealth Management, said that falling real interest rates, a weaker US dollar, rising government debt, and geopolitical turmoil could push gold prices to $4,700 per ounce in the first quarter of 2026, and gold mining stocks would outperform.
"Although the magnitude and speed of the rise in gold prices may mean increased subsequent volatility, we still believe that gold is an important part of a risk-resistant investment strategy," he wrote.
Khandelwal warned that given that inflation remains sticky, US real interest rates are likely to fall into negative territory if the Federal Reserve implements interest rate cuts.
"We believe that this will weaken the attractiveness of the US dollar and drive more investment funds into gold," he said. "In fact, World Gold Council data shows that global gold ETFs recorded monthly cash inflows of $17 billion in September, a new record; total cash inflows reached $26 billion in the three months ended in September, the strongest quarterly performance ever."
UBS believes that investment demand for gold is likely to increase further. Khandelwal wrote: "Combined with the high level of gold purchases held by central banks, we expect global gold demand to reach approximately 4,850 tons this year, the highest level since 2011. If private investors begin to mimic central banks and diversify their holdings of US Treasury bonds into gold, spot gold prices may rise further."
He concluded: "Finally, given the continued economic, geopolitical, and policy uncertainty, we expect funds to continue to flow into the gold market, which may push gold prices to rise further towards our optimistic forecast of $4,700 per ounce." He added: "Since gold's correlation with stocks and bonds is low - especially during periods of market stress, we recommend allocating a moderate single-digit percentage of gold assets in a diversified investment portfolio."
Khandelwal added: "In addition, investors can consider allocating selected shares of gold mining companies, which may see their cash flows exceed the growth of gold prices in the next six months."
On Monday, after gold prices twice touched an intraday high of $4,030 per ounce, they continued to fluctuate near the $4,000 per ounce mark.
Risk Warning: this article represents only the author’s views and is for reference only. It does not constitute investment advice or financial guidance, nor does it represent the stance of the Markets.com platform.When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice. Trading cryptocurrency CFDs and spread bets is restricted for all UK retail clients.
