Gold prices have fallen nearly 4% in a week despite escalating Middle East tensions, while Bitcoin spiked 10%. Investment bank UBS notes this price grind is temporary, predicting gold could surge 20% to reach $6,200, mirroring the energy sector’s 22% year-to-date gains. The bank states gold acts as a hedge against monetary risks from conflicts, not direct wartime threats.
Gold prices have declined nearly 4% in a week even as conflict between Iran and Israel escalated. During this period, leading cryptocurrencies like Bitcoin saw a 10% price spike.
UBS wrote in a client note that the price grind for gold is only temporary. The investment bank noted prices are materializing and could see another sharp spike, similar to the rise of energy stocks.
The overall US energy sector has surged by nearly 22% year-to-date, making it a prime investment. Gold prices will also replicate the energy sector, delivering double-digit gains again, according to UBS.
“In the short term, higher energy prices and inflation worries have led to a stronger US dollar and concerns over potential rate hikes—both are negative for gold prices,” wrote the bank. The firm maintains gold should rise toward $5,900 to $6,200 per ounce this year.
UBS highlighted that gold first spiked 15% after the Russia-Ukraine war began. “For instance, gold jumped 15% after the start of the Russia-Ukraine conflict in 2022. The same happened during the Gulf War and Iraq War—prices rose 17% and 19%, respectively, at the start but decreased as tensions eased.”
The investment bank predicts that gold prices could reach a high of $6,200 next. “Gold is more of a hedge against the wider impact of conflicts, rather than direct wartime threats. Gold primarily insulates against monetary risks like currency devaluation, rising deficits, and economic slowdowns, which can result from geopolitical conflicts.”
