Gold has shed more than 16% of its value since the U.S. and Israel launched strikes on Iran at the end of February, but UBS believes the precious metal can reclaim lost ground as fears of Federal Reserve tightening gradually ease later this year.

In a note to clients, UBS stated that gold has come under pressure because "worries that high energy prices will lead to tighter monetary policy from the Federal Reserve and other central banks, raising the opportunity cost of holding the precious metal." 

Two-year U.S. Treasury yields have risen close to 60 basis points since the conflict began, and the correlation between those yields and gold now stands near -0.6, a sharp reversal from the slightly positive relationship seen earlier in 2026.

The Swiss bank trimmed its year-end gold forecast to $5,500 per ounce from $5,900, but still expects the metal to climb from its current level and surpass its prior record high of roughly $5,400. 

UBS noted that its base case is for the Fed to cut rates at its December policy meeting, followed by further easing in March 2027, and that "as evidence mounts later in the year that higher energy prices have not generated large second-round effects, the Fed will start to adopt a more dovish tone."

Central bank demand is expected to provide a floor, with UBS projecting purchases of 200 to 250 metric tons in the second quarter. 

The firm "remains positive on the outlook for gold," citing reserve diversification, elevated global debt burdens and the prospect of easier monetary policy as medium-term supports.