What role can gold play in portfolios

31 July 2026, 16:00 UTC Chief Investment Office GWM Investment Research

What role can gold play in portfolios? UBS House View Briefcase Dominic Schnider, CFA, CAIA, Strategist, UBS Switzerland AG; Giovanni Staunovo, Strategist, UBS Switzerland AG; Jon Gordon, Strategist, UBS AG Hong Kong Branch

Key message New this week Gold has come under pressure as stronger US data, higher real yields, The World Gold Council’s latest Gold Demand and a firmer dollar have raised the opportunity cost of holding it. Trends report pointed to stable total demand Prices may still consolidate in the near term as markets weigh sticky in the second quarter, but weaker demand inflation and hawkish Fed fears against signs of slower labor-market in segments like investment and jewelry. In momentum. But we remain constructive over the next 12 months and contrast, central bank and over-the-counter gold see weakness as an opportunity for under-allocated investors to build demand were both strong. exposure. One liner

01 Higher yields and a stronger USD have kept gold under pressure. Strong US data and rising real yields have sapped gold's near-term momentum, but we • Gold was trading around USD 4,060/oz at the time of writing. think the shine will return over the medium term. • The precious metal has fallen roughly 25% since the start of the US-Iran conflict in late February. Did you know? • Strong US economic data and higher real yields have pushed markets from expecting Federal Reserve cuts to contemplating a • Gold’s inverse relationship with US real rate hike this year, increasing the opportunity cost of holding a non- yields has reasserted itself, meaning rate yielding asset. expectations are once again doing more to drive prices than geopolitical headlines.

02 But the recent weakness looks more like a reset than a broken investment case. • In our view, markets are focusing on the opportunity cost, with gold’s non-yielding • While investor demand for gold ETFs has been weaker, positioning characteristics once again becoming a more data suggest investors have not abandoned the asset. important consideration as real rates remain • We continue to expect the Fed to stay on hold in 2026 and see its elevated. next move as a cut in 2027, which should eventually ease pressure from real yields and the US dollar. • We expect structural trends, such as elevated government debt as well as central banks' • Central bank demand, continued diversification away from the and global investors’ efforts to diversify their US dollar, and global debt concerns remain important structural USD holdings, to support gold’s long-term supports. outlook.

03 So we would treat near-term weakness as a portfolio- building opportunity. Investment view • We continue to expect gold to move toward USD 5,200/oz over the We see gold as a strategic hedge within an next 12 months, even after lowering nearer-term forecasts to reflect investment portfolio. We believe around a mid- delayed Fed easing and softer ETF demand. single-digit portfolio allocation is optimal for those with an affinity for gold. We expect the • Pullbacks toward the USD 3,850-4,000/oz range should be seen as price of gold to end the year around USD 4,600/ opportunities for underallocated investors to add exposure, rather oz, and rise to USD 5,200/oz by June 2027. than a reason to abandon the position.

• Gold still offers diversification benefits during equity-market stress, geopolitical shocks, inflation surprises, and periods of weaker confidence in fiat currencies.

This report has been prepared by UBS Switzerland AG and UBS AG Hong Kong Branch. Please see important disclaimers and disclosures that begin on page 3.

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