Gold has regained much of the ground lost during a sharp pullback in late October, returning to record territory by the end of December.
The yellow metal reached a new all-time high on December 29, capping its strongest year since 1979 after a 64% rally in 2025 and gains of nearly 140% since the start of 2023.
“Gold reached new record highs in late December, driven by demand for real assets amid USD weakness, geopolitical tensions, institutional uncertainties, and low seasonal liquidity,” UBS strategists led by Giovanni Staunovo said in a note.
Despite the scale of the recent rally, UBS believes the fundamental backdrop remains supportive of further upside in 2026. The strategists point to a sharp decline in U.S. real interest rates, which it describes as “the opportunity cost of holding non-yielding assets like gold,” now at its lowest level since mid-2023.
Moreover, demand from both investors and central banks remains near record highs, while concerns about rising government debt across advanced economies continue to underpin interest in gold as a store of value. Together, these drivers justify expectations for new record levels next year.
“Our view on gold remains bullish,” the strategists wrote, who recently raised their March 2026 gold price target to $5,000 an ounce.
“We think gold’s role as a diversifier and hedge is undiminished. For investors with an affinity for the asset class, we think a mid-single-digit allocation to gold can fit in a diversified portfolio,” they added.
Recent geopolitical events have further reinforced the bullion’s defensive characteristics. UBS highlighted the unexpected U.S. military capture of Venezuelan President Nicolas Maduro last weekend, which triggered a broad reaction across markets.
The bank also sees structural demand trends providing ongoing support. Strategists expect central bank gold purchases to reach 900 to 950 metric tons in 2025, just below the prior year’s record.
They forecast total global gold demand of around 4,850 metric tons, which would mark the highest level since 2011.
Alongside this, UBS flags a sharp rise in government debt across advanced economies, projected to reach around 110% of GDP this year, up from roughly 75% two decades ago, and rising further toward 118% by the end of the decade, according to the International Monetary Fund.
Elsewhere, HSBC commodity strategists see gold prices hitting $5,000 as early as first half of the year.
“We expect prices to trade to or near $5,000/oz in 1H26. It is possible, however, that as we move through 2026, the rally may flag,” strategist James Steel wrote in a note.
