UBS supports gold: the dollar's suppression is temporary, and gold remains the "king of safe havens," expected to reach new highs again this year!

Although gold’s safe-haven status is being questioned, UBS believes that the “failure moment” of gold could be the starting point for the next new high.

According to Chase Trading Platform, UBS strategist Joni Teves stated in the global precious metals review report released on March 17 that the core factors supporting the gold bull market remain intact, and the trend of investors continuously increasing their allocations has not reversed. It is expected that gold will hit a new all-time high again this year.

The report suggests that the current suppression of gold prices by high real interest rates and a strong dollar is a short-term disturbance, and any pullback is an opportunity for investors to build positions.

This statement comes amid market doubts about gold’s safe-haven properties. Since the beginning of the year, gold price volatility has surged sharply, yet during periods of heightened geopolitical risks, it performed poorly. This “counterintuitive” trend has raised concerns among some market participants about the long-term trend of gold. UBS believes these concerns are overinterpreted, and gold’s role as a diversification tool in investment portfolios remains undiminished.

Is gold “failing”? Essentially, short-term macro variables are dominating

The biggest confusion in the market recently is: why hasn’t rising geopolitical risk led to a sustained increase in gold prices?

UBS points out that this “failure” is more a result of short-term shifts in pricing logic.

On one hand, rising real interest rates and a strengthening dollar exert double pressure. Higher real rates increase the opportunity cost of holding gold, while a rising dollar directly suppresses gold prices denominated in USD.

On the other hand, the market is currently more focused on the chain of “rising oil prices—rising inflation—Fed maintaining tightening” rather than “oil shocks—economic slowdown—policy shift.” This single narrative weakens gold’s macro hedge properties in the short term.

In other words, gold is not failing; it is temporarily suppressed by stronger macro variables.

Safe-haven logic hasn’t disappeared; its mode of action has changed

The report emphasizes that a common misconception about gold is viewing it as an “immediate response asset” to geopolitical conflicts.

But historical experience shows that gold’s reaction to geopolitical events is often nonlinear:

• Short-term escalation of conflicts can indeed push prices higher quickly;
• However, such gains are usually not sustainable and tend to be retraced;
• The real impact is that conflicts reinforce investors’ long-term willingness to allocate gold.

Therefore, the significance of geopolitical risks for gold is not to trigger a trading rally but to increase its weight in global asset allocation.

Oil price scenarios and their impact on gold

Analysts have constructed three scenario frameworks based on different assumptions about the Strait of Hormuz situation.

In the most optimistic scenario, if the situation cools quickly, the impact on oil prices will be limited. A moderate supply disruption of about 1 million barrels per day could exert more substantial upward pressure. In the most pessimistic scenario—if supply disruptions persist longer—Brent crude could rise to around $120 this month and further break through $150 in Q2.

Whether oil flows through the Strait of Hormuz can return to normal will be a key variable determining price trends and the most closely watched risk point in the market.

For gold, UBS believes that recent reactions could be complex—if real interest rates and the dollar continue to strengthen, gold prices may further decline.

However, UBS sees any pullback as an opportunity for investors to establish long-term gold positions. The persistence of geopolitical tensions will ultimately support gold’s role as a diversification tool. If economic growth slows and triggers fiscal and/or monetary stimulus measures, it will pose upside risks for gold.

The core driver of this gold bull market: reallocation of funds

UBS believes that, unlike previous gold rallies driven by inflation or dollar cycles, the current rise is primarily driven by: a sustained increase in the proportion of gold in investment portfolios by global investors.

Behind this trend are deeper macro changes:

• Long-term global uncertainties (geopolitical, policy, growth)
• Diminished hedging efficiency of traditional stock-bond portfolios
• Rising investor demand for “real assets”

Within this framework, gold is no longer just a hedging tool but is gradually becoming a part of strategic asset allocation.

UBS also notes that if high volatility persists long-term, it could challenge diversification inflows. But currently, gold volatility has retreated from highs and is trending toward normal relative to the VIX index. The report suggests that this consolidation phase helps establish a solid support at high levels for gold prices, creating a good starting point for market participants to re-enter and accumulate positions before the next rally.

Key turning points: growth pressures and policy responses

Despite short-term pressures, UBS believes the medium- to long-term bullish logic for gold remains clear, with the key variables being:

1. Potential weakening of growth

High oil prices and tightening conditions may gradually erode global economic growth momentum.

2. Policy shift from passivity to easing

Once growth clearly slows, fiscal and monetary policies may shift toward easing.

This combination implies that a decline in real interest rates and improved liquidity will reopen upside space for gold.

Under this logic, UBS maintains its view that gold prices could reach new highs within the year.

Silver follows gold, platinum group metals supported by tight market supply

For other precious metals, UBS’s overall outlook remains unchanged. Silver, platinum, and palladium have recently been consolidating, with prices under pressure. However, considering the potential drag on industrial demand from slowing global economic growth, these industrial-oriented white metals have performed relatively well.

For silver, UBS expects its positive correlation with gold to continue, and it may also hit a new all-time high this year. But the report also notes that if rising oil prices slow global growth, industrial demand could be suppressed, limiting silver’s excess performance over gold.

Regarding platinum and palladium, UBS believes that as long as signals of tight market supply persist, prices will be supported. According to Bloomberg data, the forward curves for both metals are currently in a spot premium state, especially at the long end, indicating ongoing market concerns about near-term supply.