UBS has increased its 2025 year-end gold price forecast to $3,800, which is $300 more than their earlier projection. Additionally, the forecast for mid-2026 has been raised to $3,900, up $200 from previous expectations.
Central bank purchases are anticipated to support gold prices, with buying estimated between 900 to 950 tons this year, slightly below last year’s total of just over 1,000 tons. UBS maintains an interest in gold and suggests a mid-single-digit percentage allocation in global asset portfolios.
Potential Risks And Strategic Views
A potential risk to this outlook is the possibility of the Federal Reserve raising interest rates due to unexpected inflation developments. UBS continues to view gold as an attractive asset, with their analysis indicating its strategic importance in asset allocation.
The year-end 2025 price forecast for gold has been increased to $3,800, with a further rise to $3,900 expected by the middle of 2026. Given this outlook, we believe maintaining a long position in gold derivatives is the correct strategy. In the coming weeks, traders should consider establishing or adding to bullish positions through options or futures contracts.
This positive view is supported by strong and consistent buying from central banks, which creates a solid price floor. The most recent World Gold Council data for the second quarter of 2025 confirmed that global central banks added another 235 tons to their reserves, marking a continuation of the trend we saw throughout 2024. This institutional demand is expected to absorb any short-term selling pressure.
However, the key risk we must watch is the potential for the Federal Reserve to raise interest rates if inflation surprises to the upside. The August 2025 CPI report, released just this week, showed core inflation holding at 3.4%, which is still well above the Fed’s target. Therefore, any positions should be managed carefully ahead of the Fed’s upcoming meeting on September 24th.
Strategic Trading Recommendations
Considering this risk, we recommend using options to structure trades with defined risk. A practical approach would be to buy bull call spreads on the December 2025 gold futures, which would profit from a move toward the $3,800 target while capping potential losses if the Fed turns more hawkish than anticipated. This strategy allows us to stay long but protects capital from unexpected rate announcements.
Looking back, the environment reminds us of the 2022-2024 period, when persistent inflation and geopolitical uncertainty fueled a major gold rally despite a rising rate environment. That historical precedent suggests that strong underlying demand can outweigh concerns over monetary policy. We should therefore see any price dips ahead of the Fed meeting as potential buying opportunities.
