Gold is 2025’s best performer. UBS sees more upside

Gold has emerged as the strongest performing asset of 2025, gaining 28% year-to-date, with UBS forecasting its price to reach $3,500 by December and $3,700 by September 2026. This surge is attributed to concerns over U.S. fiscal sustainability, Federal Reserve independence, geopolitical tensions driving de-dollarization, and robust demand from central banks and exchange-traded funds, pushing total global gold demand to a projected 14-year high of 4,760 metric tons in 2025. UBS maintains an "attractive" view on gold, emphasizing its critical role in portfolio diversification and hedging, particularly as potential Fed policy easing could weaken the dollar and lower real yields.

Analysis

Gold has established itself as the top-performing asset class of 2025, registering a 28% year-to-date gain and outpacing major asset classes including equities and Bitcoin. According to analysis from UBS, spot gold at $3,337 per ounce is forecasted to appreciate to $3,500 by December 2025 and continue its ascent to $3,700 by mid-2026. The rally is supported by a confluence of macroeconomic and geopolitical factors, including concerns over U.S. fiscal sustainability and Federal Reserve independence, which are fueling de-dollarization trends and sustained demand from central banks. Investment demand is also robust, with the World Gold Council reporting the strongest first-half ETF inflows since 2010, prompting UBS to increase its full-year ETF demand forecast to nearly 600 metric tons. This contributes to a projected 3% rise in total global gold demand to 4,760 metric tons in 2025, the highest level since 2011. The outlook is further bolstered by the prospect of renewed Fed policy easing in response to below-trend U.S. growth, which would likely weaken the dollar and lower real yields, thereby reducing the opportunity cost of holding the non-interest-bearing asset. The primary risk to this thesis remains a potential hawkish pivot from the Fed if inflationary pressures necessitate further rate hikes.

Key Decisions for Investors

• Given the strong fundamental tailwinds and positive price targets from UBS, gold warrants consideration as a strategic allocation for portfolio diversification and as a hedge against persistent geopolitical and U.S. fiscal risks.
• Investors should closely monitor U.S. economic data and Federal Reserve signals, as any indication of future policy easing could serve as a significant catalyst for gold by lowering real yields.
• While the outlook is constructive, the primary risk to monitor is a potential shift to a more hawkish Fed policy, which would likely create a headwind for gold prices and may warrant tactical adjustments to exposure.