Despite lackluster performance since the outbreak of the Iran conflict, commodity analysts at UBS believe that recalibrations of risk, interest rate policies, inflation, and robust underlying demand could push the yellow metal to as high as $6,200 per ounce by the end of 2026.
In a Friday report, analysts noted that gold has struggled to break above $5,200 per ounce since tensions with Iran began, with anticipated safe-haven buying failing to materialize. They observed, "This contrasts sharply with last year’s 65% surge, when falling real interest rates and debt concerns provided fundamental support alongside heightened geopolitical risks. Recent performance mirrors historical patterns during such events, where investors seek liquidity and consider alternatives like energy assets."
"For example, after the Russia-Ukraine conflict erupted in 2022, gold rose 15%, only to decline 15–18% as the Federal Reserve hiked rates. Similar patterns occurred during the Gulf War and Iraq War—initial price jumps of 17% and 19%, respectively, were followed by retreats as tensions eased."
However, recent sideways trading has not shaken the Swiss banking giant’s conviction that gold could gain another 20% or more by 2026.
The report stated, "We maintain our expectation for gold to reach $5,900–$6,200 per ounce this year. Gold serves more as a hedge against the broad monetary repercussions of conflict—such as currency debasement, rising deficits, and economic slowdown—rather than a direct response to wartime threats."
Analysts acknowledged, "In the short term, energy-driven inflation fears have strengthened the U.S. dollar and raised concerns about potential rate hikes—both headwinds for gold. But we expect central banks to remain vigilant on inflation without rushing to raise rates."
Prolonged U.S.-Iran tensions could also increase the risk of negative economic spillovers, potentially boosting safe-haven gold demand.
Over the longer term, gold remains an outstanding inflation hedge. According to the Global Investment Returns Yearbook, gold and commodities have shown positive real returns correlated with inflation since 1900.
UBS also highlighted strong underlying demand for gold. "Although ETF investors trimmed gold positions slightly earlier this month, holdings have recently shown greater stability, and hedge funds have moderately increased net long positions. We believe total demand could remain robust, supported by continued central bank buying, rising investment activity, and structurally stronger jewelry demand from Asian income growth."
Structural trends are expected to further support gold’s appeal. "High government debt, along with diversification efforts by central banks and global investors away from the U.S. dollar, should bolster gold’s long-term outlook. Given macro and political uncertainties beyond the Iran conflict, we remain bullish and view gold as an effective portfolio diversifier. Investors may consider allocating up to a mid-single-digit percentage to gold in a diversified portfolio."
On February 23, UBS analysts predicted that gold would eventually reflect the full impact of escalating geopolitical tensions around Iran and, considering the Fed’s easing path and growing market demand, could rise by another $1,000 per ounce by June.
They wrote at the time, "Despite gold’s muted reaction to recent geopolitical tensions, we believe prices have further room to climb. Our forecast is for the precious metal to reach $6,200 per ounce in the coming months, as key drivers behind its strong rally remain intact."
UBS expects geopolitical risks to stay elevated. "Reports indicate the region has seen the deployment of two aircraft carriers, fighter jets, and refueling planes—a larger U.S. military buildup than was seen off Venezuela earlier this year. Whether a deal with Iran can be reached remains uncertain, as the likelihood of military action appears to be rising."
They added, "Broadly speaking, geopolitical uncertainty is unlikely to fade given the U.S. administration’s approach to foreign affairs. While such events often don’t have lasting global market impacts, they can trigger temporary volatility spikes, supporting demand for portfolio hedges like gold."
The Fed’s easing policy should also continue to support gold. "A weaker U.S. dollar and lower real rates are favorable for gold, and we believe this macro backdrop remains intact as the Fed’s easing cycle has further to run. Despite strong recent jobs data and some hawkish tones in the latest Fed minutes, easing inflation pressures and a more dovish composition of the Fed later this year should support additional rate cuts. We expect two 25-basis-point cuts by the end of September."
Analysts also project stronger gold demand in 2026. "World Gold Council data show total gold demand exceeded 5,000 metric tons for the first time in 2025, and we expect further recovery supported by investment inflows and robust central bank purchases. Asian income growth should also underpin long-term structural demand for gold jewelry. Meanwhile, supply has stagnated. While high prices may spur mine exploration, Wood Mackenzie estimates 80 mines will exhaust current production plans by 2028."
UBS concluded that these factors create a highly supportive environment for sustained gold price appreciation.
"We maintain a positive outlook on gold and view it as an effective portfolio diversifier, helping to hedge a range of market and economic risks. Investors favorable toward gold may consider an allocation of up to a mid-single-digit percentage within a diversified portfolio."
On February 16, Dominic Schnider, Head of Commodities and APAC FX Chief Investment Officer at UBS Global Wealth Management, stated that as volatility subsides, gold and other key commodities would face favorable fundamentals.
Schnider wrote in a commodities update, "Precious metals prices, though volatile, rose in January due to safe-haven demand driven by political, geopolitical, and economic uncertainties." He also noted that copper consolidated after hitting a record high late in the month, while oil prices gained support from short-term supply disruptions in the U.S. and Kazakhstan, a weaker dollar, and Middle East tensions.
Schnider said UBS continues to see favorable fundamentals for gold and other key commodities as recent volatility fades.
"We expect gold to resume its climb, reaching up to $6,200 per ounce by mid-year, supported by central bank and investor demand, large fiscal deficits, lower U.S. real rates, and geopolitical risks. We anticipate further supply deficits in copper and aluminum, which should support prices medium-term, while structural drivers like electrification underpin long-term demand."
Schnider suggested that investors with no gold exposure consider adding some, while those heavily invested might diversify into other commodities.
"For investors favorable toward gold, we believe a moderate allocation can enhance diversification and hedge systemic risks. For those holding significant gold with substantial unrealized gains, broadening commodity exposure to include copper, aluminum, and agriculture can help diversify future return sources."
He added, "In our view, commodities will play a more important role in portfolios in 2026, offering diversification amid supply-demand imbalances, geopolitical risks, and the global energy transition. We are positive on broad commodity exposure and remain bullish on gold, which we see as an attractive hedge."
Schnider’s $6,200 per ounce forecast marks a significant increase from his outlook just a month earlier. On January 5, he wrote that central bank buying, growing fiscal deficits, falling U.S. rates, and persistent geopolitical risks would push gold to $5,000 by the end of the first quarter.
He wrote at the time, "Commodities will take on greater importance in portfolios in 2026. Within the asset class, we are particularly positive on opportunities in copper, aluminum, and agriculture, while gold remains a valuable portfolio diversifier."
He indicated that tight supply and rising demand would likely support price gains for many commodities in 2026, and he expected this year’s gold rally to continue. "In our view, gold should move higher, backed by central bank purchases, large fiscal deficits, lower U.S. real rates, and ongoing geopolitical risks."
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