Gold prices could taper off in the coming months before climbing in the long run, according to a strategist at UBS.

Investors are likely seeing a late stage in bullion’s bull run, Joni Teves, precious-metals strategist at the Swiss investment bank, told MarketWatch in a Friday interview.

Gold prices often advance during conflicts as traders flock toward safe-haven assets in periods of market volatility, but they also generally have an inverse relationship with Federal Reserve interest rates, whereby bullion rises when the central bank decides to cut.

The day before the U.S. and Israel struck Iran, the probability of rates being held through the Fed policy meeting in December was just 4%, per the CME Group’s FedWatch tool. From the time the Fed began cutting in September 2024, it has said rates could continue to come down as inflation moved gradually back to the central bank‘s 2% target.

However, since the start of the war in Iran, expectations of easing monetary policy have waned, with the market currently pricing no change in rates this year — which means gold prices are less likely to rise.

On Thursday, gold was changing hands around $4,700 an ounce, after peaking at just over $5,600 in late January. The yellow metal dropped 11% in March, its biggest one-month fall since June 2013, and is down 12% from a record high reached just over two months ago, according to Dow Jones Market Data.

UBS’s research arm has an end-of-year gold target of $5,600 per ounce, based primarily on the assumption that investors will continue to want to diversify their portfolios with purchases of the precious metal. This trend could continue to push prices higher, Teves said.

“Our sense is that the market as a whole is still underinvested in gold,” she added. “We think the uncertainty the market is facing right now further reinforces this trend of investors wanting to hold more diversified portfolios, and they view gold as a core part of that portfolio.”

Teves said the UBS team’s base case is gold prices seeing fresh highs later in the year, after a period of consolidation, on the back of building allocations. “That said, given the ongoing Middle East conflict, there could be material changes to the macroeconomic outlook and policy expectations, which would in turn imply corresponding shifts to gold’s medium- to long-term path.”

The recent drop in the price of gold may also present opportunities for investors to buy a dip. “We think that around these levels and any further pullback should kind of start to look attractive for many investors,” Teves said, adding that, despite this, a lot of market participants have been waiting on the sidelines for clarity regarding the war.