UBS strategists, in a report released Thursday, stated that lower real interest rates will drive investors back into the gold market, with a weaker US dollar and robust central bank gold purchases expected to push prices toward the $5,000 per ounce mark by the first half of 2027.

The strategists believe that declining real interest rates will reignite investment demand for gold. They anticipate inflation will moderate gradually, allowing the Federal Reserve to hold interest rates steady this year and restart a monetary easing cycle in 2027. "This should create a more favorable macroeconomic backdrop for gold—shifts in policy rate expectations will lower real yields, pressure the dollar, and boost gold investment demand," the report noted.

UBS sees the US dollar as potentially resilient in the near term, but structural challenges, including high fiscal and external deficits and already elevated investor allocations to dollar assets, "suggest there is room for the dollar to weaken again."

Historically, a weaker dollar has been a strong tailwind for gold, and renewed market focus on "de-dollarization" allocations will also benefit the precious metal, the report stated. Meanwhile, central bank gold purchases "have remained a crucial support pillar, even during periods of weak private investment demand." UBS expects annual central bank buying to stay at elevated levels, driven by a long-term desire to reduce dollar-denominated asset exposure.

"Although the short-term macroeconomic environment may remain volatile, the medium-to-long-term bullish case for gold is supported by multiple persistent drivers," UBS said. "We forecast gold prices to reach $5,000 per ounce by the first half of 2027."

On Thursday, gold futures fell as investors took profits following a two-month high. US inflation data, which came in line with expectations, further reduced market bets on a rate hike next month. The Comex near-month August gold contract declined 1%, closing at $4,363.60 per ounce, ending a four-day winning streak. The near-month August silver contract also fell 1%, settling at $64.873 per ounce.