The recent decline in gold prices has led some investors to question whether the metal still deserves its long-standing reputation as a safe-haven asset. However, UBS said in a note on Tuesday that the fundamental case for gold remains unchanged.
Gold has retreated from levels above $5,400 reached in early March to slightly above $5,000 currently, after briefly slipping below the key threshold during Monday’s trading.
UBS strategist Joni Teves said the simple answer to whether gold still functions as a safe haven is yes, emphasizing that its diversification benefits remain intact despite recent market swings.
According to UBS, “the factors that have underpinned gold’s bull run are still in place,” with growing investor allocations expected to drive “new record highs this year.”
Teves acknowledged that short-term conditions have created uncertainty around the outlook.
“Higher real rates and a stronger dollar are acting as a headwind,” she said, noting that markets have recently focused on the inflation implications of rising oil prices and the potential impact on Federal Reserve policy.
However, she added that this dynamic represents “only one piece of the puzzle,” pointing out that slower economic growth that leads to fiscal or monetary stimulus “presents upside risks for gold.”
Ongoing geopolitical tensions also continue to support longer-term demand for the metal. Teves said the persistence of global uncertainty “underpins strategic demand for gold as investors seek to hold more diversified portfolios.”
She reiterated that UBS views market pullbacks as buying opportunities and maintained the bank’s expectation that gold prices will reach fresh highs this year.
UBS also said the wider precious metals sector remains relatively resilient, noting that silver, platinum and palladium have “held reasonably well” despite potential risks tied to industrial demand.