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UBS Expects Gold to Reach USD5,500 per Ounce by End-2026; Short-term Volatility Likely
According to a report released by the European Central Bank in June 2026, gold accounted for 27% of its official reserves as of end-2025, surpassing US Treasuries at 22% and the eu...
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UBS Expects Gold to Reach USD5,500 per Ounce by End-2026; Short-term Volatility Likely
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According to a report released by the European Central Bank in June 2026, gold accounted for 27% of its official reserves as of end-2025, surpassing US Treasuries at 22% and the euro at 15%. This development came amid continued large-scale gold purchases by central banks, while this years rise in gold prices also lifted the value of existing holdings. Affected by higher gold prices, the ECBs net gold purchases slowed to about 850 tonnes in 2025, compared with around 1,000 tonnes in 2024.

The trend toward reserve diversification remains intact. Although golds share exceeding that of US Treasuries reflects price-driven valuation effects rather than a fundamental shift in central bank reserve systems, UBS maintains a constructive medium-term outlook on gold. The bank cites reserve diversification, elevated public debt levels, and strong central bank demand as key supportive factors. In 2Q26, central bank gold purchases are expected to remain at around 200 to 250 tonnes. However, gold prices may remain volatile in the near term, as high real yields, a stronger US dollar, and softer ETF demand in the second quarter pose challenges. UBS expects gold to reach USD5,500 per ounce by end-2026. Meanwhile, higher yields continue to enhance the appeal of high-quality fixed income and money market instruments, which investors may consider while awaiting a more favorable macro environment.

UBS is also constructive on private equity and views Asia as an important diversification complement to core allocations in North America and Europe. Within the region, the bank prefers broad geographic diversification and favors buyout strategies over venture capital and growth strategies, as buyouts typically offer greater return stability and cash distribution advantages. Buyout strategies are also better positioned to capture key structural themes, such as corporate governance reforms in Japan and domestic demand growth opportunities in markets such as India. From a broader portfolio perspective, UBS continues to advocate diversification across asset classes, geographies, and sectors, while favoring managers with strong operational value-creation capabilities. Against a backdrop of more rational valuations and gradually improving growth prospects, UBS expects Asias private equity market to continue attracting long-term capital inflows. Investors should also remain mindful of inherent risks in private markets, including lower transparency, longer lock-up periods, and limited liquidity.

UBSs base-case scenario for the US midterm elections is a divided Congress, which would not result in major policy changes and would therefore have limited impact on core market drivers. Although the US is currently under unified government, relatively little legislation has materially influenced markets over the past two years. While the "Beautiful Bill" has been passed, its overall impact is still being assessed. At the same time, UBS expects US President Donald Trump to continue advancing policies through executive powers in areas such as tariffs, foreign affairs, deregulation, and immigration, regardless of election outcomes. From a market perspective, a divided Congress would not represent a fundamental departure from the environment of the past two years.

Beyond fiscal policy, other drivers of the current bull market are likely to persist, including solid corporate earnings growth, deepening AI adoption prompting major technology companies to increase capital expenditure, and a still-accommodative monetary policy stance. As economic growth potentially moderates, the Federal Reserve is expected to cut interest rates twice between late 2026 and early 2027. However, this forecast could be adjusted in the coming months if the policy stance of Federal Reserve Chair Kevin Warsh changes.

Regarding interest rates, US Treasury yields continue to be primarily driven by inflation expectations and economic fundamentals. However, during the midterm election period, policy uncertainty may cause short-term deviations from fundamentals. While monetary policy fundamentals remain the dominant factor for rates, differing policy priorities under various political configurations may still influence bond market pricing of future growth and inflation paths. (sl/u)

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