UBS predicts gold’s 2025 rally could defy rate cuts and a strong dollar, fueled by central bank demand and economic uncertainty.

Why UBS Is Still Bullish on Gold for 2025—Even With Rate Cuts in Limbo

UBS, the Swiss multinational investment bank and financial services giant, has offered an optimistic outlook on gold for 2025, despite the metal losing some momentum in December following the U.S. Federal Reserve’s hawkish stance during its policy meeting. In 2024, gold surged by 27.6%, marking one of its strongest annual performances in over a decade and surpassing the S&P 500’s returns.

While the Fed’s tone caused short-term headwinds, UBS analysts remain confident that gold’s upward trajectory can continue into the new year, supported by structural economic factors and ongoing central bank demand. “We believe gold can build on its 2024 gains. Although U.S. rates may fall less than expected, they are still on track to decline. And the case for holding gold rests on more than rates,” they wrote in a report on Jan. 6, adding:

We expect central bank demand to remain solid—we forecast purchases of around 900 metric tons in 2025—driven by diversification and dedollarization trends.

UBS’s Chief Investment Office (CIO) highlighted central banks’ significant role in driving gold demand. The forecast reflects increasing diversification and dedollarization trends among global central banks. Despite potential challenges, including fewer anticipated rate cuts and a stronger U.S. dollar, UBS maintained a positive stance.

The global investment banking giant further stated:

Moreover, an increasing U.S. federal deficit and the worsening of its debt profile over the long run should underpin gold’s attractiveness versus the U.S. dollar.

Reflecting the shifting economic environment, UBS lowered its 2025 gold price forecast by $50 per ounce. The bank now projects gold will reach $2,850 an ounce by the end of 2025, down from its previous estimate. Despite this downward adjustment, gold was trading at $2,639 per ounce as of last week, indicating UBS still expects the metal to rise, albeit at a slower pace than initially anticipated.
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