15.04.202600:37 Forex Analysis & Reviews: Gold Prices Expected to Rise Amid Geopolitical Uncertainty – UBS

According to Giovanni Staunovo, a commodities specialist at UBS, prices for commodities such as gold and oil are forecast to continue rising, even after the conflict with Iran concludes. Investors with significant gold holdings should consider expanding their investments in the commodity sector.

In his analytical report released on Monday, Staunovo highlighted the impact of the protracted conflict in the Middle East on the commodities industry.

"Increasing tensions in Iran and the risks associated with the Strait of Hormuz have created additional pressure on prices and volatility in commodity markets, especially in oil," he noted. "We continue to see commodity price dynamics driven by fundamental economic factors, as well as a supply-demand imbalance and rising geopolitical risks. Increasing the share of commodities and a focus on active management can help investors hedge against inflationary risks and supply shocks in energy resources."

Staunovo emphasized that before strikes on Iran, Brent crude oil prices hovered around $72 per barrel and on Monday reached $100 per barrel.

"Today's gold price is slightly less than 13% of its historical high recorded in January, while expectations for rising interest rates due to escalating tensions are impacting market sentiment," he added. "Overall, a broad range of commodities has shown an increase of about 17% since the beginning of the year, according to the UBS CMCI Composite Total Return Index in U.S. dollars."

Although uncertainty regarding geopolitical risks is expected to diminish, the fundamental factors supporting commodity price growth remain positive.

"Stockpiles of petroleum products in various countries are declining, which may necessitate price increases to balance demand until inventories are restored," he noted. "In the medium term, we still expect significant increases in gold prices, provided that geopolitical uncertainty remains high and expectations for rising interest rates decline."

Staunovo also added that UBS forecasts a further supply deficit for copper and aluminum, which will, in turn, support high prices for these metals in the medium term, despite structural factors such as electrification driving long-term demand for them.

"Returns from commodities can be high when demand-supply imbalances or macroeconomic risks, such as inflation and geopolitical events, have a significant impact," he noted. "For investors who prefer gold, we recommend a moderate investment, which will enhance diversification and protect against systemic threats." Staunovo also emphasized that for investors with large holdings and significant unrealized gold assets, expanding their portfolios into copper, aluminum, and agricultural products could help diversify future profit sources.

On March 16, UBS predicted that a reassessment of risk parameters, monetary policy, inflation, and the resilience of underlying demand would drive gold prices to $6,200 per ounce by the end of 2026.

Analysts noted that at the outset of the conflict in Iran, gold failed to surpass $5,200 per ounce, as its perceived role as a safe-haven asset did not materialize. "Unlike the 65% price increase in the previous year, when increased geopolitical risks supported gold, current data reflects historical behavior in similar situations, where investors seek liquidity and resources in alternative assets such as energy goods." Thus, gold saw a 15% jump after the onset of the Russia-Ukraine conflict in 2022, but then experienced a 15-18% price drop after the Federal Reserve raised interest rates.