UBS Stays Bullish on Gold for 2025 as Central Banks Fuel Demand Surge

UBS Stays Bullish on Gold for 2025 as Central Banks Fuel Demand Surge

Why UBS Is Still Bullish on Gold for 2025—Even With Rate Cuts in Limbo

UBS, the Swiss multinational investment bank and financial services giant, has maintained an optimistic outlook for gold in 2025. Despite a slight dip in momentum in December 2024 following the U.S. Federal Reserve’s hawkish policy stance, UBS analysts see structural factors driving continued strength in the gold market.

In 2024, gold surged by 27.6%, achieving one of its best annual performances in over a decade and outpacing the S&P 500’s returns. While the Federal Reserve’s tone created short-term headwinds, UBS believes that gold’s upward trajectory will persist into 2025, driven by central bank demand and economic uncertainty.

Central Bank Demand as a Key Driver

UBS analysts emphasized the pivotal role of central banks in underpinning gold’s demand, stating:

“We expect central bank demand to remain solid—we forecast purchases of around 900 metric tons in 2025—driven by diversification and dedollarization trends.”

The bank’s Chief Investment Office (CIO) highlighted ongoing global diversification efforts and dedollarization among central banks as primary factors sustaining gold demand. These trends reflect a strategic shift among global financial institutions seeking to reduce reliance on the U.S. dollar.

Economic and Fiscal Backdrop

UBS also pointed to macroeconomic factors bolstering gold’s appeal. An increasing U.S. federal deficit and a deteriorating debt profile are expected to strengthen gold’s attractiveness as a safe-haven asset compared to the U.S. dollar. Even with fewer anticipated rate cuts and a potentially stronger dollar, UBS maintains a bullish outlook.

Revised Gold Price Forecast

Reflecting changes in the economic environment, UBS has adjusted its 2025 gold price forecast, lowering it by $50 per ounce. The bank now projects gold to reach $2,850 per ounce by the end of 2025, compared to its previous estimate. As of last week, gold was trading at $2,639 per ounce, suggesting UBS still expects upward movement, albeit at a more moderate pace.

Outlook for 2025

UBS’s outlook underscores the resilience of gold in the face of shifting economic and monetary policies. With central bank purchases projected to remain robust and structural fiscal concerns persisting, gold is poised to build on its strong 2024 performance, offering investors a hedge against economic uncertainty and currency volatility.