Despite the questioning of gold's safe-haven status, UBS believes that gold's &#34;moment of failure&#34; could be the starting point for the next round of new highs.
According to the Wind Trading Desk, UBS strategist Joni Teves pointed out in the global precious metals review report released on March 17 that the core factors supporting the gold bull market remain intact, and the trend of investors continuously increasing their allocations has not reversed. It is expected that gold will reach a new historical high this year.
The report argues that the current high real interest rates and strong dollar pressure on gold prices are short-term disturbances, and any pullback presents an opportunity for investors to build positions.
This statement comes against the backdrop of market doubts about gold's safe-haven attributes. Since the beginning of the year, gold price volatility has surged sharply, but it has performed poorly during the recent rise in geopolitical risks. This &#34;counterintuitive&#34; trend has raised concerns among some market participants about gold's long-term trend. UBS believes that this concern has been overinterpreted, and gold's function as a portfolio diversification tool has not been compromised.
<h2>Gold &#34;failure&#34;? Essentially dominated by short-term macro variables</h2>
The biggest confusion in the market recently is: why has the rise in geopolitical risks not led to a sustained increase in gold prices?
UBS points out that this &#34;failure&#34; is more a result of a short-term shift in pricing logic.
On one hand, the rise in real interest rates and the strengthening dollar create dual pressure. Rising real interest rates mean that the opportunity cost of holding gold increases, while the appreciation of the dollar directly suppresses the performance of gold priced in dollars.
On the other hand, the market is currently more focused on the chain of &#34;rising oil prices—elevated inflation—Federal Reserve maintaining tightening,&#34; rather than the path of &#34;oil price shock—economic slowdown—policy shift.&#34; This singular narrative has temporarily weakened gold's macro-hedging attributes.
In other words, gold has not become ineffective; rather, it is temporarily suppressed by stronger macro variables.
<h2>The logic of safe-haven assets has not disappeared, but the way it operates has changed</h2>
The report emphasizes that a common misunderstanding in the market regarding gold is viewing it as an &#34;immediate reaction asset&#34; to geopolitical conflicts.
However, historical experience shows that gold's response to geopolitical events is often nonlinear:
<ul>
<li>
Short-term escalation of conflicts may indeed drive prices up quickly;
</li>
<li>
But such increases are usually difficult to sustain and often retrace;
</li>
<li>
The real impact is that conflicts strengthen investors' long-term willingness to allocate to gold.
</li>
</ul>
Therefore, the significance of geopolitical risks to gold lies not in triggering a trading rally but in promoting its increased weight in global asset allocation.
<h2>Price paths of crude oil under three scenarios and their impact on gold</h2>
Analysts have constructed three scenario frameworks based on different assumptions about the situation in the Strait of Hormuz.
In the most optimistic scenario, if the situation can cool quickly, the impact on oil prices will be relatively limited. If there is a moderate supply disruption of about 1 million barrels per day, the market will face more substantial upward pressure. In the most pessimistic scenario—where supply disruptions extend over a longer period—Brent crude oil could rise to around $120 this month and further break through $150 in the second quarter
Whether the oil flow in the Strait of Hormuz can return to normal will be the core variable determining price trends and is currently the most closely watched risk node in the market.
For gold, UBS believes that the recent reactions may be more complex—if real interest rates and the dollar continue to strengthen, gold prices may further decline.
However, UBS believes that any pullback provides an opportunity for investors to establish long-term gold allocations. The persistence of geopolitical tensions will ultimately support gold's strategic demand as a portfolio diversification tool. If economic growth slows and triggers fiscal and/or monetary stimulus measures, it will bring upward risks to gold.
<h2>The Core Driver of the Current Gold Bull Market: Capital Reallocation</h2>
UBS believes that unlike previous gold markets that relied on inflation or dollar cycles, the core driving force behind this round of increases is: global investors continuously increasing the allocation of gold in their portfolios.
Behind this trend are deeper macro changes:
<ul>
<li>
Long-term global uncertainty (geopolitical, policy, growth)
</li>
<li>
Decreased hedging efficiency of traditional stock-bond portfolios
</li>
<li>
Increased demand for &#34;real assets&#34; from investors
</li>
</ul>
Within this framework, gold is no longer just a hedging tool but is gradually becoming part of strategic asset allocation.
UBS also points out that persistently high price volatility, if maintained long-term, may pose challenges to diversified allocation inflows. However, currently, gold volatility has retreated from its peak, and its trend relative to the VIX index is normalizing. The report believes that the current consolidation phase helps form solid support for gold prices at high levels, creating a good starting point for market participants to re-enter and accumulate positions before the next round of increases.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/6ee30075-2a51-40b1-83ab-3d5b8700874a.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/6ee30075-2a51-40b1-83ab-3d5b8700874a.png"/>
<h2>Key Turning Points: Growth Pressure and Policy Response</h2>
Despite short-term pressure, UBS believes that the medium- to long-term upward logic for gold remains clear, with its core variables being:
1. Potential Weakening on the Growth Side
High oil prices and a tightening environment may gradually erode global economic growth momentum.
2. Passive Shift on the Policy Side
Once growth slows significantly, fiscal and monetary policies may shift towards easing.
This combination means: a decline in real interest rates + improved liquidity will reopen upward space for gold.
It is under this logic that UBS maintains its judgment: gold prices are still expected to reach new highs within the year.
<h2>Silver Follows Gold, Platinum Group Metals Supported by Tight Market Supply</h2>
In terms of other precious metals, UBS's overall judgment remains unchanged. Silver, platinum, and palladium are currently in a consolidation phase, with prices under pressure. However, considering the potential drag on industrial demand from slowing global economic growth, these white precious metals with stronger industrial properties have performed relatively robustly.
For silver, UBS expects its positive correlation with gold to continue, and it is also expected to reach a historical high this year. However, the report also notes that if rising oil prices drag down global economic growth, the pressure on industrial demand will constrain silver's relative outperformance against gold
In terms of platinum and palladium, UBS believes that as long as signals of tight market supply persist, prices will be supported. According to Bloomberg data, the forward curves of both metals are currently in a spot premium state, particularly evident at the long end of the curve, indicating that market concerns about recent supply have not yet dissipated.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/3e02c826-e729-4fa8-bf4f-8f42fabdb05a.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/3e02c826-e729-4fa8-bf4f-8f42fabdb05a.png"/>

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Behind the "failure" of gold may lie the entry signal for the next round of new highs. UBS strategists point out that the recent weakness in gold prices is not due to a breakdown in risk-averse logic, but rather a short-term suppression from high real interest rates and a strong dollar— the core driving force of the bull market, "global capital reallocation," remains intact. Once a slowdown in growth forces a policy shift, a decline in real interest rates will reopen upward space, and the current consolidation phase may instead serve as a window for building positions

- UBS believes that despite doubts about gold's safe-haven status, we may be at the beginning of a new high for gold prices.  
- The report indicates that core factors supporting the gold bull market remain intact, with investors continuing to increase their allocations, expecting gold to reach new historical highs this year.  
- UBS emphasizes that any short-term declines present opportunities for investors to build long-term gold positions, driven by geopolitical tensions and a shift in market dynamics.

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UBS supports gold: Dollar suppression is temporary, still the "king of safe havens," expected to reach new highs this year!