UBS and Deutsche Bank both upgraded their forecasts on gold, raising price forecasts as the Federal Reserve resumes easing, central bank demand remains robust, and the U.S. dollar faces downward pressure.
Earlier this month, UBS raised its gold price outlook by $300 to $3,800 per ounce by the end of 2025, and by $200 to $3,900 by mid-2026. Deutsche Bank went even further this week, boosting its 2026 average forecast to $4,000 per ounce, up from $3,700.
Per Bloomberg, the German lender noted” fair value models suggesting that prices have room to run when accounting for excess demand from central banks,” also adding the monetary policy independence risks.
On Wednesday, the Federal Open Market Committee cut its policy rate by 25 basis points, the first reduction of 2025 after 100 basis points of cuts last year. The decision lowered the target range for the federal funds rate to 4.0%-4.25%. While most members supported the move, Stephen Miran, newly sworn in, dissented, arguing for a deeper 50-basis-point cut.
The Fed’s updated “dot plot” suggests two more cuts are likely this year, with the median forecast for the federal funds rate at 3.625% by the end of 2025. Chairman Jerome Powell acknowledged that risks to the economy have shifted, with more concern now focused on the labor market than on inflation.
The path of U.S. rates is crucial for bullion. Gold is a non-yielding asset, so it tends to perform better when interest rates are low and real yields are compressed. Deutsche Bank highlighted uncertainty stemming from potential challenges to Fed independence, as President Donald Trump has sought to exert greater control over monetary policy.
Still, UBS warned that any inflation surprise could force the Fed to reverse course, and dampen gold’s momentum.
Central bank demand is another key driver. Net official sector purchases are expected to remain between 900 and 950 tons this year, only slightly below last year’s near-record levels. Deutsche Bank noted that demand is running at twice the 2011–2021 average, led by China, while recycled supply is lagging. With official buyers maintaining the floor, investors see less downside risk.
The third factor is the U.S. dollar. Both banks argued that as the Fed cuts rates further, the greenback is likely to weaken, boosting gold priced in dollars. While risks remain, from strong equity markets to seasonal softness in the fourth quarter, the case for gold as a safe-haven asset is strengthening.
Institutional interest also shows little sign of fading. Reuters reported that Canadian miner Ivanhoe Mines (OTCQX:IVPAF) this week secured a $500 million investment from Qatar’s sovereign wealth fund, equal to around 4% of the company. Executive co-chairman Robert Friedland noted a strong appetite for the mining industry.
“In my 40 years in the industry, I’ve never seen so much interest in critical raw materials,” he said.
Price Watch: SPDR Gold Trust ETF (NYSE:GLD) is up 37.30% year-to-date.
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