UBS raises gold target to $5,400, citing de-dollarization

UBS ↗ 0.99% has lifted its gold price target to $5,400 an ounce over a 12-month horizon, calling the precious metal "a clear beneficiary of de-dollarization" and arguing the rally that has sent prices surging roughly 15% this month still has room to run.kitco+1

The Swiss bank's Chief Investment Office wrote in a note on Tuesday that investor focus on the long-term shift away from the U.S. dollar has intensified amid renewed concerns over the country's fiscal outlook. "The DXY dollar index has fallen 2.4% over the past month," UBS noted, adding that structural factors including trade policy uncertainty and growing evidence of reserve diversification by foreign central banks will keep the depreciation trend intact.kitco

Central Bank Demand and ETF Inflows

UBS pointed to resumed inflows into gold exchange-traded funds and robust central bank purchases as evidence of firm demand. The People's Bank of China added 20 metric tons to its gold reserves in July, its largest monthly increase since October 2023. The bank estimates central banks bought 289 tonnes in the second quarter and projects full-year purchases of 750 to 1,000 tonnes in 2026.investinglive+1

UBS also expects markets to scale back expectations for further Federal Reserve rate hikes, which would reduce real yields and weigh on the dollar — both historically supportive of higher gold prices.kitco

Gold Nears 15-Week High Ahead of Jackson Hole

Gold prices rose 1.1% on Thursday to around $4,643, resuming an advance after a brief pullback from a 15-week high of $4,697 reached earlier in the week. Gains were capped by a firmer dollar following Personal Consumption Expenditures data that showed inflation running at 3.7% year-over-year in July, keeping alive expectations of another rate hike before year-end.economies+1

Markets are now awaiting the start of the Jackson Hole Economic Symposium, which opens Thursday and runs through August 29. Fed Chair Kevin Warsh is scheduled to deliver his first Jackson Hole address on Friday. According to the CME FedWatch Tool, markets price a 64% probability the Fed will hold rates steady in September, with a 74% probability of a 25-basis-point hike by December.Investinglive+2

Broader Diversification Playbook

Beyond gold, UBS recommended broad commodity exposure, citing strong oil demand in emerging markets and industrial metals benefiting from electrification, the energy transition, and AI infrastructure buildout. The bank also favors the British pound, Norwegian krone, New Zealand dollar, and Chinese yuan as selective alternatives to the greenback.investinglive+1

"As the long-term shift away from the US dollar continues, we think exposure to gold, broad commodities, and select currencies can help support returns and manage portfolio risks," UBS concluded.kitco