After the gold price jumped significantly over the past week, UBS Global Wealth Management, together with other wealthy managers, discuss the outlook and the benefits of including gold in investors’ portfolios.

After gold rose to its highest level in seven weeks, UBS Global Wealth Management chief investment office believes that the medium- to longer-term case for holding the yellow metal remains strong, supported by lower real rates, a softer dollar, and central bank buying.

Gold climbed above $4,250 per ounce for the first time since June, exceeding its recent trading range of between $4,000/oz and $4,100/oz. Reported Chinese institutional buying and inflows into exchange-trade funds have supported the latest price movement, while recent joint government efforts by the US and Japan to stabilise the yen could have helped reduce the risk of a sell-off in US Treasuries, according to UBS GWM CIO.

However, near-term risks remain, especially if US data stay firm, oil prices keep inflation concerns alive, or markets continue to price in a more hawkish Federal Reserve rate path, the wealth manager said in a report.

But while the immediate backdrop could remain volatile, UBS thinks the medium- to long-term case for gold looks supported by several durable drivers. The firm expects gold prices to rise towards $5,000/oz in the first half of 2027. UBS GWM CIO continues to see a role for gold in diversified portfolios.

Arun Sai, senior multi-asset strategist at Pictet Asset Management has also upgraded gold from neutral to overweight as investor demand is strengthening and emerging market central banks continue to increase reserves. He sees further upside for gold as real interest rates gradually ease, eroding the opportunity cost of holding a non-yielding asset.

UBS said lower real rates should revive investment demand for gold. The metal does not pay income and higher real yields increase the opportunity cost of holding it. But UBS expects inflation to gradually moderate, allowing the Fed to hold interest rates steady in 2026 before resuming easing in 2027. “This should create a more favourable backdrop for gold, as a shift towards lower policy-rate expectations would likely reduce real yields, weigh on the US dollar, and help boost investment demand for gold,” UBS said.

The US dollar could stay resilient in the near term, but structural challenges including large US fiscal and external deficits and already-elevated investor allocations to dollar assets, mean that there is scope for renewed weakness, UBS said. A weaker dollar has historically boosted gold, while a renewed focus on diversification away from the dollar should benefit the precious metal.

Central bank support
Central bank demand has also remained an important pillar of support, even when private investment demand has been lacklustre. UBS expects annual central bank purchases to remain elevated, supported by a long-term desire to reduce exposure to dollar assets. Following a strong second quarter, when central banks bought 289 metric tons of gold, the Swiss bank estimates that full-year purchases in the 750 to 1,000 metric ton range this year. While these flows might not be enough to drive prices sharply higher on their own, they can help stabilise the market and offset weaker areas such as jewellery demand, the firm added.

According to the World Gold Council, an industry group of gold mining companies, Chinese jewellery demand fell by 32 per cent year-on-year in the first quarter of 2026. Demand for bars and coins rose by 67 per cent to a quarterly record of 207 tonnes. For the first half of the year, the WGC saw plentiful bullion demand but weak jewellery consumption. Demand also shifted in India during the first quarter: jewellery demand fell by 19 per cent, while bar-and-coin demand rose by 34 per cent to 62 tonnes.

UBS thinks that investors should separate near-term trading risk from the longer-term investment case. In fact, periods of weakness towards $4,000/oz or below could ultimately prove to be opportunities for building exposure. For investors with an affinity for real assets, the bank thinks a mid-single-digit gold allocation is appropriate in a well-diversified portfolio. Investors could also consider a broad exposure to commodities for better portfolio diversification, the bank added.

See more about the precious metal here.