Investing.com — UBS analysts reaffirmed their bullish stance on gold in a note this week, highlighting its value as a hedge against rising macroeconomic and geopolitical uncertainties.

UBS pointed out that gold has surged by 23% this year, hitting all-time high spot prices due to a combination of factors such as “expectations of lower US yields and the continuing trend of USD diversification by central banks.”

UBS advises investors to consider an allocation of around 5% to gold within a balanced USD portfolio.

According to the bank’s analysts, gold has historically outperformed equities during periods of elevated volatility, a trend that has been proven again in recent months.

Despite reduced expectations for larger Federal Reserve rate cuts following the US CPI release, gold remains strong, particularly with support from the European Central Bank’s rate cuts.

While prices briefly weakened after the US core inflation rose unexpectedly, UBS saw that as a temporary fluctuation.

The bank’s mid-2025 target remains USD 2,700/oz, supported by increasing demand from gold ETFs.

In August, physically-backed gold ETFs saw their fourth consecutive month of inflows, driven by “increased safe-haven demand” and cooling US labor markets.

UBS highlighted that North America has seen strong inflows, while Asia, particularly India, continues its positive trend thanks to favorable tax and budget changes.

UBS remains “Most Preferred on gold” in its global asset allocation strategy. Given its hedging properties, the bank concludes that gold remains an essential part of a diversified investment strategy, particularly as uncertainty continues to grip the global economic landscape.