Gold’s recent decline has sparked debate over whether the precious metal can regain its upward momentum, but analysts at UBS believe the downturn may prove temporary.
According to the bank, gold— which had been “up as much as 25% in January,”— has now “erased virtually all of its 2026 gains.” Despite remaining higher for the year overall, the metal has fallen nearly 11% over the past month.
While the drop may seem surprising given the elevated geopolitical tensions, UBS said such movements are not unusual.
“Gold does not always rally during periods of conflict, particularly in the early stages. The economic context is crucial,” the bank wrote.
In the current environment, surging energy prices have pushed markets to anticipate tighter monetary policy, raising the opportunity cost of holding assets like gold that do not generate yield.
UBS noted that expectations for interest rates have shifted significantly. Markets have moved from anticipating “two and a half Fed rate cuts in 2026, to no further easing this year, and even a small probability of a hike.” At the same time, bond markets are now pricing in several rate increases from both the European Central Bank and the Bank of England.
The bank believes this market reaction may be overdone, pointing out that higher energy costs could ultimately weigh on economic growth. UBS still expects the Federal Reserve to begin easing policy later this year, which could help revive demand for gold once the current flight-to-liquidity phase subsides.
“Our view is that the decline in gold is likely to be relatively short-lived. While the timing is hard to pinpoint, we do expect gold to rebound and forecast the precious metal to climb to USD 6,200 an ounce by the end of June, scaling back to USD 5,900/oz in early 2027, from around USD 4,500/oz at present,” UBS concluded.