Gold is edging ever closer to $4,000 an ounce, and UBS thinks the rally still has legs. With the Federal Reserve easing policy, the dollar softening and real interest rates falling, the bank argues that conditions remain supportive for bullion.
Lower “carry costs”, the expense of holding gold rather than interest-bearing assets, should also draw more money into exchange-traded funds, where inflows have already picked up.
Seasonal patterns may help too: physical buying tends to strengthen in the final quarter of the year and into early spring.
UBS expects demand from both retail and institutional investors, as well as central banks and buyers in Europe, Asia and the Middle East, to provide a floor on any dips.
Strategist Joni Teves sees the current bull market as broad-based rather than overcrowded. Gold still accounts for less than 1% of global assets under management, leaving room for further allocations.
That said, after a steep run-up, some near-term consolidation looks likely, which UBS frames as an opportunity for investors to add to positions.
The longer-term story is more nuanced. The bank expects concerns about debt, fiscal policy, de-dollarisation and geopolitics to keep strategic demand high through 2026.
But as the Fed’s easing cycle winds down and the economic backdrop improves, the rally may begin to taper.
Even so, UBS believes gold’s role as a permanent portfolio diversifier has been cemented, meaning that any correction is likely to stabilise at higher levels than in past cycles.
Risks cut both ways. A softer economy, more dovish Fed signals or momentum buying could push prices higher.
But weaker demand from consumers or central banks, or a surprise rebound in global growth, perhaps fuelled by AI-driven productivity gains, could test the bulls’ conviction.
And while the gold price rally has boosted the stock prices of many larger gold producers, there is also a group of smaller operators and explorers that have seen greater investor interest from the higher gold price.
Among them are Sonoro Gold Corp (TSX-V:SGO, OTCQB:SMOFF), which has seen its stock price surge 300% over the past 52 weeks. Sonoro owns the development-stage Cerro Caliche project and the exploration-stage San Marcial project in Mexico.
The company said recently it plans to update a key economic study for its flagship Cerro Caliche project while also weighing a possible spinout of a second property into a new company.
Another company making progress is C3 Metals Inc (TSX-V:CCCM, OTC:CARCF), which is developing gold and copper deposits in Peru and is also actively exploring in Jamaica.
On Tuesday, C3 kicked off its first-ever drill program at the Khaleesi copper-gold project in Peru, which will include 14 diamond drill holes totalling 6,300 metres. C3 Metals shares have gained more than 300% year to date.
Canagold Resources Ltd (TSX:CCM, OTCQB:CRCUF) shares have also benefitted, gaining more than 48% year to date. The company is advancing its New Polaris gold-antimony project in British Columbia.
On Wednesday, Canagold revealed high grade antimony-gold results from concentrate testing at New Polaris.