UBS confidently predicts that gold prices may challenge $5,000 in the first half of next year, supported by declining real interest rates and central bank gold purchases as pillars.

In a recent report released on Thursday, UBS strategists indicated that declining real interest rates will drive investors back to the gold market, while a weak dollar and strong central bank gold buying demand will together push gold prices toward the $5,000 per ounce mark in the first half of next year. UBS pointed out that the expected decline in real interest rates will reignite market demand for gold investments. The bank believes that inflation will gradually cool, allowing the Federal Reserve to keep interest rates steady this year and restart the easing cycle in 2027. This should create a more favorable macro backdrop for goldshifts in policy rate expectations will lower real yields, pressure the dollar, and boost demand for gold investments. UBS believes that the dollar may remain resilient in the short term, but high U.S. fiscal and external deficits, along with investors elevated allocations to dollar assets, present structural challenges that suggest the dollar has room to weaken again. The report stated: Historically, a weakening dollar has always been a strong tailwind for gold, and renewed focus on de-dollarization allocations will also benefit this precious metal. Meanwhile, central bank gold demand has always been an important support pillar, even during periods of sluggish private investment demand. UBS expects that driven by a long-term desire to reduce exposure to dollar assets, annual central bank gold purchases will remain at elevated levels. Although the short-term macro environment may still experience volatility, the long-term bullish logic for gold is supported by several enduring driving factors, UBS stated, We expect gold prices to rise to $5,000 per ounce in the first half of 2027. On Thursday, gold futures prices fell as investors chose to take profits after gold reached a two-month high. Previously released U.S. inflation data met expectations, further diminishing market expectations for a Federal Reserve rate hike next month. Gold futures for August delivery on the COMEX fell 1%, closing at $4,363.60 per ounce, ending a four-day streak of gains. August silver futures also fell 1%, settling at $64.873 per ounce.