Gold could resume its upward trajectory during the second half of 2026 if the Federal Reserve refrains from raising interest rates again, investment demand recovers, and central banks continue their strong purchases, according to UBS strategists.

The metal traded near $4,077.00 per ounce on July 30, 2025, after declining in recent months. A drop in investment and jewelry demand, coupled with increased mine supply, limited the upward momentum.

Data from the World Gold Council showed that demand for bars and coins fell to 307.00 metric tons in the second quarter, compared with more than 400.00 tons in each of the previous two quarters.

Investment demand, excluding over-the-counter transactions, fell to 262.00 tons from 487.00 tons a year earlier, reflecting outflows from gold-backed exchange-traded funds.

Central bank purchases provided stronger support, reaching 289.00 tons in the second quarter. Total purchases in the first half of the year amounted to approximately 345.00 tons, equivalent to an annualized rate of 700.00 tons.

According to the analysis, gold remaining above $4,000.00 requires a recovery in investment flows and official sector demand remaining near 300.00 tons in the quarter.

Monetary policy remains the key driver. Markets are pricing in the likelihood of the Federal Reserve raising interest rates this year, which tilts short-term risks to the downside and opens the door for a decline towards $3,850.00.

A decision to keep interest rates unchanged, followed by a cut in early 2027, could revive demand. Lower real returns would reduce the opportunity cost of holding non-interest-bearing gold and could weaken the US dollar.

Diversification away from the dollar and inflation concerns will also provide additional support for gold's role as a reserve asset and safe haven.

Mine production rose to 966.00 tons in the second quarter from 948.00 tons a year earlier. Meanwhile, the supply of recycled gold fell to 326.00 tons from 374.00 tons in the first quarter, providing some offsetting the increased production.

The forecast places gold at $4,400.00 by September and $4,600.00 by December. Prices are then expected to reach $5,000.00 in March 2027 and $5,200.00 by June.

A drop to around $3,850.00 could represent an entry point for long-term investors, although short-term prospects remain cautious.