UBS backs de-dollarization trend, lifts gold target to $5,400 an ounce
UBS is treating dollar weakness as a structural theme rather than a short-term wobble, which points to sustained flows into gold, commodities and selected currencies rather than a quick reversal. Its emphasis on central bank reserve diversification, highlighted by another large gold purchase from the People's Bank of China, suggests official sector demand could keep providing a floor under bullion even if speculative positioning turns. The bank's preference for the pound, Norwegian krone, New Zealand dollar and yuan over broad dollar shorts points to a more selective approach to the trade rather than a blanket bet against the greenback. Near-term, UBS flags Middle East tensions and higher oil prices as a potential offsetting support for the dollar, meaning the medium-term depreciation thesis could see bumps along the way.
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UBS says de-dollarization is a trend to build around, not trade around, with gold as the biggest beneficiary.
Summary:
- The DXY dollar index has fallen 2.4% over the past month amid renewed concerns over the US fiscal outlook, according to UBS
- UBS expects a gradual, medium to long-term dollar depreciation trend to persist despite possible near-term support from Middle East tensions and higher oil prices, citing US fiscal concerns, trade policy uncertainty and reserve diversification
- Gold has risen around 15% this month, and UBS forecasts it reaching $5,400 an ounce over the next 12 months, supported by resumed inflows into gold ETFs, robust central bank buying, and expectations that markets scale back Fed rate hike bets
- The People's Bank of China added 20 metric tons to its gold reserves in July, its largest monthly increase since October 2023
- UBS favours broad commodity exposure alongside gold, citing strong oil demand growth in emerging markets, industrial metals demand tied to electrification, energy transition and AI infrastructure buildout, and potential El Niño-related disruption to agricultural supply
- UBS holds a Neutral stance on the euro but sees scope for EURUSD to move toward 1.20 over time, and favours selective exposure to the British pound, Norwegian krone, New Zealand dollar, Chinese yuan and select emerging market currencies
UBS says investor attention on the long-running shift away from the US dollar has intensified recently, as renewed concerns about the US fiscal outlook add fresh momentum to the de-dollarization theme. The bank notes the DXY dollar index has fallen 2.4% over the past month.
While UBS acknowledges the dollar could find near-term support from tensions in the Middle East and higher oil prices, it expects the broader trend of gradual diversification away from the currency, and a depreciation trend over the medium to longer term, to remain in place. The bank points to ongoing worries over the US fiscal trajectory, uncertainty around trade policy, and growing evidence that a number of countries are actively diversifying their reserve holdings away from the dollar as the key drivers. UBS suggests investors ensure their currency allocations match their liabilities and spending plans, and consider exposure to gold, broad commodities and select global currencies to diversify accordingly.
Gold features prominently in UBS's thinking as a direct beneficiary of the de-dollarization trend, with the bank describing bullion as a reliable store of value and an alternative to traditional reserve currencies. Gold has risen around 15% this month, and UBS expects further gains as pressure on the dollar persists and as markets scale back expectations for Federal Reserve rate hikes, a dynamic it says should support the metal. The bank points to renewed inflows into gold exchange-traded funds and continued robust central bank purchases as evidence of firm demand, highlighting that the People's Bank of China added 20 metric tons to its gold reserves in July, its largest monthly increase since October 2023. UBS forecasts gold reaching $5,400 an ounce over the next 12 months.
Beyond gold, UBS argues broad commodities offer a differentiated source of portfolio return, particularly as a hedge if rising inflation expectations weigh on equities and bonds. The bank expects oil demand to keep growing, particularly in emerging markets, while industrial metals should benefit from long-term demand tied to electrification, the energy transition and the global buildout of AI infrastructure. UBS also flags the potential for weather disruption linked to El Niño to constrain crop supplies and push agricultural commodity prices higher.
On currencies, UBS sees scope for a broader recovery in the euro against the dollar as incoming data allows markets to price in no further Fed hikes this year and possible rate cuts in 2027, alongside an expected further European Central Bank rate rise in September that the bank thinks could help push EURUSD toward 1.20 over time. UBS keeps a Neutral stance on the euro itself, but says the current backdrop favours selective exposure to higher-yielding currencies including the British pound and Norwegian krone. The bank also likes the New Zealand dollar, citing a hawkish policy bias from the country's central bank, and the Chinese yuan, on the back of strong export-driven currency inflows, while noting select emerging market currencies may offer additional carry opportunities.
UBS concludes that as the long-term move away from the dollar continues, exposure to gold, broad commodities and select currencies can help support returns and manage portfolio risk, adding that an actively managed approach to commodities can help investors navigate shifting supply conditions, geopolitical risk and changes in market leadership.
This article was written by Eamonn Sheridan at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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