UBS flags level in gold prices where dip buyers will likely emerge

Gold may dip to around $4,000 per ounce, according to UBS, where analysts believe structural buyers will step in to provide support. This potential price level is forecasted by UBS strategist Giovanni Staunovo, who notes that high U.S. real yields and a strong dollar may push gold back down to this level. Spot gold is currently trading at $4,191 as of the latest update.

The decline in gold prices is attributed to commercial accounts reducing their net long positions in futures and options, while ETF holdings have remained resilient with consistent inflows. Gold's sensitivity to rising real rates appears to have weakened, as structural demand factors such as central bank diversification, worries about public debt, and an anticipated weaker dollar provide stronger counterbalances.

Central bank purchases of gold have been robust, with China accounting for 23 metric tons and Uzbekistan at 7 metric tons in September. UBS projects annual central bank purchases to reach 750 to 1,000 tons. The Federal Reserve is anticipated to hike rates by over 75 basis points through 2027, with UBS expecting a further hike this year and two additional rate cuts in 2027.

UBS expects gold prices to climb to $4,600 by December, $5,000 by March 2027, $5,200 by June, and $5,400 by September 2027. The bank advises investors interested in real assets to consider adding exposure around the $4,000 price level, signaling potential buying opportunities.