Political, fiscal and financial risks will boost gold demand even higher in H1 2026 – UBS

“Gold has recently recouped part of the decline from late October, and we expect rising demand for the precious metal to support higher prices ahead,” wrote the Chief Investment Office of UBS in a Thursday update. “Further interest rate cuts by the Federal Reserve, lower real yields, increasing fiscal risks, and changes in the domestic US political environment should extend the current strong buying trends of central banks and investors, in our view.”

On Nov. 20, UBS raised its 2026 mid-year gold target price to $4,500/oz – up from $4,200 previously. The bank also raised its upside target for gold by $200 to $4,900 per ounce on a possible spike of political and financial risks, but maintained its downside case at $3,700 per ounce.

UBS analysts said the worsening U.S. fiscal outlook will likely support central bank and investor gold purchases and they expect demand for exchange-traded funds (ETFs) to remain strong in 2026.

On the other hand, they warned that potential Fed hawkishness and the risk of central bank gold sales remained key challenges to their bullish outlook.

And on Nov. 3, UBS analysts said the current pullback in the gold market is only temporary, and they see an upside scenario of intensifying geopolitical or market risks that could drive the yellow metal’s price as high as $4,700.

“The much-anticipated correction has taken a breather,” they wrote in a research note. “Outside technical factors, we see no fundamental reason for the sell-off.”

The Swiss banking giant noted that “fading price momentum triggered a second leg down in futures open interest,” but they emphasized that underlying demand remains strong.

UBS analysts also cited the World Gold Council’s Q3 Gold Demand Trends report, which confirmed “very strong and accelerating buying” from both central banks and individual investors.

“Central bank purchases of 634 metric tons this year have been slower than last year’s pace but are picking up in Q4, in line with our forecast of 900–950 metric tons for 2025,” they wrote.

ETF inflows of 222 metric tons and bar and coin demand above 300 metric tons for the fourth consecutive quarter demonstrate that investor appetite has also strengthened. “Jewellery demand was also not as weak as feared,” UBS noted.

“We like to buy the dip in gold,” the analysts said, adding they continue to believe that investors “remain underallocated” to the metal. UBS recommends a mid-single-digit allocation to gold within investor portfolios.

Spot gold is seeing a strong finish to the holiday-shortened Thanksgiving week, last trading at $4,215.96 for a gain of 1.37% on the daily chart.