(UBS)
Higher real yields and a firm US dollar have weighed on gold.
- Gold lost around 7% in September as rising government bond yields increased the opportunity cost of holding a non-yielding asset.
- Elevated US yields and broad US dollar strength could continue to create near-term volatility for precious metals.
- Expectations for an October Federal Reserve rate increase have receded, although investors still expect a 25-basis-point increase in December. CIO expects the Fed to hike in both December this year and March next year.
But central bank buying, reserve diversification, and fiscal concerns continue to support gold.
- Central bank demand remains robust, supported by efforts to reduce concentrated exposure to US dollar assets.
- Elevated government debt, fiscal sustainability concerns, and questions about currency purchasing power continue to support demand for real assets.
- Gold is not another institution’s liability, reinforcing its appeal as a store of value and an alternative reserve asset during periods of financial or geopolitical stress.
So, CIO continues to view gold as a strategic portfolio hedge and diversifier.
- CIO forecasts gold to rise toward USD 5,400 an ounce by September 2027, supported by central bank buying, reserve diversification, elevated government debt, and geopolitical uncertainty.
- Pullbacks toward USD 4,000 an ounce can be seen as opportunities for investors to add exposure.
- Investors with an affinity for gold can consider maintaining a mid-single-digit allocation, while those with substantial holdings can diversify into other commodity sectors.
Investment view
CIO remains constructive on gold over the next 12 months despite the near-term headwinds from elevated real yields and a firm US dollar. Central bank demand, reserve diversification, elevated government debt, and geopolitical uncertainty continue to support its strategic portfolio role. Investors with an affinity for gold can consider using price weakness to build or maintain a mid-single-digit allocation.
Original report – What role can gold play in portfolios?, 19 October 2026.
