UBS raises gold price target: may rise to $3,800 by the end of the year, ETF holdings approaching historical record

UBS Group has significantly raised its gold price forecast, believing that the bull market for gold is far from over due to the combined effects of expectations for Federal Reserve easing, a weaker dollar, and geopolitical risks.

UBS has raised its gold price target for the end of 2025 by $300 from its previous level to $3,800 per ounce. At the same time, the bank has also increased its mid-2026 gold price forecast by $200 to $3,900 per ounce.

Recently, the gold market has shown strong upward momentum, reaching a historic high of $3,673.95 per ounce this Tuesday, with a cumulative increase of over 39% for the year. As of the time of writing, spot gold is up 0.3% to $3,644 per ounce.

UBS's analysis shows that investment demand for gold is rapidly heating up. The bank predicts that by the end of 2025, the total holdings of gold exchange-traded funds (ETFs) will exceed 3,900 tons, approaching the historical record of 3,915 tons set in October 2020.

Easing Expectations and Geopolitical Factors are Major Drivers, Institutional and Central Bank Demand Remains Strong

UBS stated that its bullish outlook on gold is based on its assessment of the future macroeconomic environment. The bank expects the Federal Reserve to begin a rate-cutting cycle, which will directly lead to a weaker dollar, thereby enhancing the attractiveness of gold priced in dollars.

The report believes that geopolitical risks and the policy divergence between the U.S. government and the Federal Reserve are key factors boosting gold's safe-haven value. Additionally, the report specifically mentions former President Trump's preference for low interest rates, which is also expected to support gold prices. Traditionally, gold performs well in a low-interest-rate environment.

Meanwhile, the global central bank gold-buying spree is expected to continue. UBS predicts that this year, global central bank gold purchases will remain at a strong level of 900 to 950 tons, although slightly lower than last year's record level of just over 1,000 tons, still demonstrating confidence in gold as a reserve asset.

Despite the optimistic outlook, UBS also pointed out the main downside risks facing gold. UBS added in the report:

"The key risk for gold is if inflation data unexpectedly rises, forcing the Federal Reserve to raise interest rates."