UBS: Ignoring Interest Rates, Focus on Gold’s Long-Term Support Factors

Huitong Network, September 9—The Federal Reserve’s short-term policy decisions will not undermine the medium-term outlook for global stock markets—equities continue to benefit from AI sector spending, economic resilience, and broad-based corporate earnings growth; likewise, short-term rate hikes will not weaken gold’s strategic role in investment portfolios.

In the past two weeks, gold has come under renewed pressure due to the rise in US Treasury yields, hawkish comments from Federal Reserve Chair Walsh, and stronger-than-expected US nonfarm payroll data. After accumulating a 15% gain in the first three weeks of August, gold prices have now retreated by 5.5%. In the same period, a UBS market strategy report specifically analyzed the differentiated impact of rising yields on equities, bonds, and gold during this rate hike cycle.



The market expects the Federal Reserve to raise rates by a combined 50 basis points this year. The pressure from higher real yields combined with a stronger US dollar may continue to weigh on gold’s short-term performance.

However, the Federal Reserve’s short-term policy decisions will not undermine the medium-term outlook for global stock markets—equities continue to benefit from AI sector spending, economic resilience, and broad-based corporate earnings growth; likewise, short-term rate hikes will not weaken gold’s strategic role in investment portfolios.

Gold remains a highly valuable diversifying asset, especially for investors who prefer physical assets.

The People’s Bank of China purchased 650,000 ounces of gold (about 20 tons) in August, up from 640,000 ounces in July, marking the largest monthly increase since October 2023. This purchase has extended the Chinese central bank’s streak of consecutive gold buying to 22 months. China is not the only country seeking to expand its gold reserves. A recent survey by the World Gold Council shows that nearly 90% of surveyed central banks expect global official gold reserves to continue to grow in the next 12 months, with 45% planning to increase their own gold holdings. The market continues to expect that annual central bank gold purchases globally will reach 750–1000 tons, providing vital structural support for gold.



In the short term, high Federal Reserve interest rates combined with US economic resilience favor a stronger dollar; but over longer cycles, continued concerns over fiscal sustainability may limit further appreciation of the US dollar. Growing government debt will also prompt the world to gradually reduce over-concentration in dollar assets. Gold is recognized as a reliable store of value and an alternative to traditional reserve currencies, which will benefit gold in this trend. Over the medium to long term, if the dollar weakens, it will also boost demand for precious metals and support gold prices.


Persistent inflationary pressures and geopolitical uncertainty reinforce gold’s position as a hedging and diversification tool in portfolios. Institutional investors allocate or increase gold holdings largely because of its performance in times of crisis, its ability to hedge geopolitical risks, and its diversification value. Historically, gold has also had inflation-hedging properties. According to the “Global Investment Returns Yearbook”, since 1900, gold and commodity real returns have shown a positive correlation with inflation.

In summary, the long-term investment case for gold remains intact. Gold should primarily be seen as a hedging and diversification tool within investment portfolios, not as a tactical trading asset for speculating on short-term policy swings by the Federal Reserve. Investors with insufficient allocation can use gold price corrections to gradually establish strategic gold positions within a well-diversified portfolio.