Gold Pullback Temporary, $4,200 Target Remains in Sight

Gold’s recent price pullback is merely a technical correction, and the precious metal remains on track to hit $4,200 per ounce, according to analysts at UBS. The Swiss bank suggests that the recent drop is not driven by any fundamental shift but by short-term technical factors, with the metal’s long-term outlook still robust.

No Fundamental Shift Behind the Correction

In a research note released on Monday, UBS acknowledged that the pullback had triggered some weakness in market momentum. However, they emphasized that the underlying demand for gold remains strong, both from central banks and individual investors. The firm described the dip as a “breather” rather than a trend reversal.

“We see no fundamental reason for the sell-off,” UBS analysts said, pointing to continued strong demand in the gold market. The analysts attribute the correction to fading price momentum, which has caused a decline in futures open interest but does not reflect weakening demand.

Central Banks and Investors Continue to Drive Demand

UBS referred to the World Gold Council’s Q3 Gold Demand Trends report, highlighting the robust purchasing activity by central banks and individual investors. Year-to-date central bank purchases have reached 634 metric tons, with expectations that Q4 will see stronger buying, bringing total central bank purchases for 2025 to a forecasted 900–950 metric tons.

Investor appetite is also strong, with ETF inflows of 222 metric tons and bar and coin demand exceeding 300 metric tons for the fourth consecutive quarter. This steady demand suggests that investor confidence in gold remains intact, even amidst short-term price fluctuations.

“Jewelry demand was also not as weak as feared,” UBS noted, further supporting the view that the demand for gold is broad-based and resilient.

Upside Potential: $4,700 in Sight by 2026

UBS is confident that the price of gold will continue to rise, with an upside target of $4,700 per ounce by Q1 2026, driven by factors like lower real interest rates, a weaker dollar, rising government debt, and ongoing geopolitical instability.

Sagar Khandelwal, strategist at UBS Global Wealth Management, noted that while volatility in the gold market may increase as the rally progresses, gold remains a key asset for building a resilient investment strategy.

“We believe the scale of the rally suggests that lower interest rates and a weaker U.S. dollar will boost demand for gold,” Khandelwal stated. “The large inflows into global gold ETFs, especially in September, signal that gold’s role as a hedge against inflation and market volatility continues to strengthen.”

Investment Demand Could Propel Gold to New Heights

UBS also highlighted that investment demand for gold could strengthen even further. With central banks continuing their buying spree, UBS projects global gold demand this year could reach 4,850 metric tons — the highest level since 2011.

Khandelwal pointed out that if private investors start diversifying their portfolios into gold, as central banks have done, spot prices could be pushed even higher. “As geopolitical and economic uncertainties persist, gold will remain a safe-haven asset, driving additional demand.”

Gold’s Role in a Diversified Portfolio

UBS continues to view gold favorably despite the recent decline, recommending that investors keep a mid-single-digit portion of their portfolios in the metal. The institution highlights that gold’s limited correlation with both stocks and bonds during turbulent periods supports its role as a diversifying asset.

Additionally, UBS sees potential in gold mining stocks, noting that their cash flow could rise faster than gold prices in the next six months, offering an alternative way for investors to gain exposure to the precious metal.

Gold’s Current Position and Short-Term Outlook

Gold prices continue to trade around the $4,000 mark, with spot gold recently trading at $4,000.97 per ounce, up 0.05% on the day. UBS analysts suggest that while the correction has momentarily slowed gold’s rally, the long-term uptrend remains intact, with $4,200 a clear target in the near future.

Conclusion: Despite short-term volatility and a correction in price, UBS maintains a positive outlook for gold, with prices potentially reaching $4,700 by 2026. Continued demand from central banks and investors, coupled with macroeconomic and geopolitical factors, will likely propel gold higher in the coming years.