Gold is benefiting from the growing trend of diversification away from the U.S. dollar, as concerns over the U.S. fiscal outlook and continued central-bank demand strengthen the case for the precious metal. UBS believes these forces could push gold toward $5,400 per ounce over the next 12 months.

De-Dollarization Is Becoming a Major Tailwind for Gold

According to UBS, investor interest in de-dollarization has increased as concerns over the U.S. fiscal outlook continue to build.

Over the past month, the DXY U.S. Dollar Index has fallen by around 2.4%, while gold has gained roughly 15%.

UBS believes the dollar could receive some near-term support from tensions in the Middle East and elevated oil prices. However, over the medium to long term, diversification away from the U.S. dollar is likely to remain supported by:

• Large U.S. fiscal deficits

• Uncertainty surrounding trade policy

• Growing efforts by countries to diversify reserve holdings away from the U.S. dollar

In this environment, gold stands out as one of the clearest potential beneficiaries.

UBS Targets Gold at $5,400/oz

UBS forecasts that gold could reach $5,400 per ounce within the next 12 months.

Several key factors support this outlook:

Lower real interest rates: UBS expects the Federal Reserve to keep rates unchanged this year before resuming policy easing in 2027. Lower real yields tend to support gold, which does not generate interest income.

Renewed ETF inflows: Investment demand through gold exchange-traded funds has started to recover.

Strong central-bank buying: In July, the People’s Bank of China increased its gold reserves by 20 metric tons, the largest monthly increase since October 2023.

UBS estimates that central banks could purchase around 750–1,000 metric tons of gold in 2026, after buying 289 tons in the second quarter alone.

Near-Term Risks Remain

UBS still warns that gold could remain volatile if:

• U.S. economic data stay strong

• Oil prices remain elevated and keep inflation concerns alive

• Markets price in a more hawkish Fed outlook

• U.S. Treasury yields remain high

This is why UBS makes a clear distinction between short-term trading risks and the long-term investment case for gold.

The bank believes that periods of weakness toward $4,000 per ounce or below could eventually present opportunities to build strategic exposure for suitable investors.

Gold’s Long-Term Outlook Remains Constructive

UBS’s current view suggests that gold continues to be supported by three major forces:

A weaker long-term U.S. dollar trend → potentially lower real interest rates → continued central-bank accumulation.

Against this backdrop, UBS expects gold to move toward $5,400 per ounce over the next 12 months, while continuing to view the metal as an important tool for portfolio diversification and risk management.

It is also worth noting that “de-dollarization” here refers to a gradual diversification of reserves, not an imminent collapse of the U.S. dollar’s global role. Financial markets, naturally, tend to prefer the more dramatic version.

This article is for informational and market commentary purposes only and should not be considered investment advice.

Source: Kitco