UBS bet on gold against it going into a bearish phase during the Iran war

UBS Private Wealth Management division recommended its clients not to liquidate positions in gold, despite the paradoxical collapse of its quotations during the Iranian crisis. The largest bank of Switzerland predicted the resumption of growth in the price of precious metal and continues to consider it as an effective tool for portfolio protection.

During the war in Iran, gold unexpectedly fell in price by more than 15%. As a result, the fall from the January highs exceeded 20%, moving the precious metal into the territory of the "bear" market and making investors doubt its status as a "safe haven". According to UBS analyst Wayne Gordon, the current downturn should not be perceived as a fundamental break in the trend, writes Business Insider.

"We would not view this situation as a Volcker-Bernanke moment for gold - that is, a change of course in central bank policy - as we see significant differences that indicate otherwise," Gordon wrote, referring to the lack of signs of a U.S. Fed reversal toward long-term rate hikes that would make gold an unnecessary asset for a long time (as happened under former Fed chief Paul Volcker in 1980 and his successor Ben Bernanke in 2013).

From Gordon's point of view, the restrained reaction of gold to geopolitical tensions is historically logical: the precious metal has not always demonstrated a rally at the initial stages of military conflicts. It is not the hostilities themselves that determine the price dynamics here, but the accompanying macroeconomic background - this was the case during the oil shocks of the 1970s and during the Iraq war, the expert reminded. Now gold is hampered by short-term factors: the adaptation of markets to the expectations of higher interest rates and a strong U.S. dollar. Therefore, what is happening is only a temporary delay before a new cycle of price growth, the analyst believes.

UBS forecasts that by the beginning of 2027 the price of gold will rise to $5900 per troy ounce from the current $4580, according to Yahoo Finance. This target assumes growth of precious metal quotations by almost 30%.

The precious metal's sell-off was triggered by a jump in energy prices due to the war in Iran, which increased inflationary concerns and the risk of interest rate hikes by leading central banks this year. In trading on March 23, gold collapsed by just over 20% from its March highs amid contradictory statements by U.S. President Donald Trump and Iranian authorities.

On March 24-25, the precious metal grew and rose above $4500 per ounce. The asset was supported by increased hopes for the end of the Iranian crisis, according to Trading Economics. According to Israeli Channel 12 sources, Washington is seeking a one-month cease-fire for peace talks, and The New York Times reported that Tehran has received a 15-point American plan to resolve the conflict.

This article was AI-translated and verified by a human editor