Near-term consolidation is creating buying opportunities, but silver, platinum and palladium face growing headwinds if oil prices tip the global economy into slower growth

Gold is on course to reach record highs this year despite a sharp pullback in recent weeks, according to UBS strategist Joni Teves, who says the conflict in the Middle East is building medium-term upside risks even as short-term volatility keeps many investors on the sidelines.

The bank's view on precious metals is unchanged. Gold hit an all-time high in late January before retreating as rising US real yields and a stronger dollar weighed on prices. UBS said the sell-down has been driven primarily by ETF outflows in the US and Europe, where holdings have historically been sensitive to real rates, though global ETF stocks are down less than 1% year to date. China has been an exception, with gold ETFs in the country continuing to attract net inflows, supported by strong onshore physical demand.

Why the pullback is a buying opportunity

Speculative positioning has been flushed out, UBS said, and the market is forming a base. The bank said any pullback toward the $4,000 psychological level should be treated as an opportunity to build positions. It described gold as structurally under-owned, with a widening base of private and public sector investors increasingly treating it as a long-term strategic asset rather than a tactical trade.

The medium-term case rests on several pillars. Prolonged disruption to oil and energy supply raises the risk of stagflation, a combination of weaker growth and persistent inflation that has historically been favourable for gold. Fiscal and monetary stimulus triggered by slowing growth would add further support. Lingering concerns about US debt sustainability and questions over Federal Reserve independence continue to underpin official sector and institutional demand for diversification into gold.

Silver poised to outperform, but growth risks could limit the gap

UBS expects silver to make new highs and outperform gold as the bull run resumes, but cautions that its dual role as an industrial metal introduces a vulnerability that gold does not share. A weaker global growth environment would dampen industrial silver demand, particularly from electronics and solar panel manufacturers, and weigh on investor sentiment. The bank said the gold-to-silver ratio is unlikely to retest the lows reached earlier this year and may only compress to a range of 50 to 60.

Physical silver market deficits are expected to persist, with mine supply and recycling volumes constrained against growing industrial and investment demand. UBS said silver remains more of a tactical than a strategic holding given its higher price volatility.