Gold Pulls Back but UBS Sees Strong Buy-the-Dip Interest: Is This the Next Big Entry Point?
Gold prices may have pulled back from record highs, but according to UBS strategist Joni Teves, investor interest remains robust. The sharp correction, triggered by market volatility and margin calls, is now seen as a potential entry opportunity for long-term investors who missed the previous rally.
The yellow metal had surged over 20% since the beginning of 2025, reaching an all-time high of around $3,168 per ounce just last week. Since then, it has dropped by roughly $200, prompting concerns—but also attracting bargain hunters waiting on the sidelines.
UBS: The Dip Is Temporary, Fundamentals Remain Bullish
Teves believes that the current dip is not a sign of weakness but rather a temporary correction in a fundamentally strong bull market. According to her, macroeconomic conditions such as:
- Rising recession risks
- Escalating tariff tensions
- Global stagflation concerns
- Weaker equities and volatile currencies
…continue to bolster gold’s status as a safe-haven investment.
“The macro environment remains conducive to higher gold prices,” Teves said. “Uncertainty, inflation fears, and liquidity dynamics all point toward sustained demand for gold.”
Why Did Gold Fall After the Tariff Announcement?
Despite worsening tariff outcomes, the immediate market response was a dip in gold prices. UBS highlights several near-term factors that may have contributed to the pullback:
- Profit-taking after the recent rally
- Gold used as liquidity for margin calls amid falling equities
- Exemption of gold from new tariffs, which may have triggered short-term relief selling
- Low liquidity conditions amplifying volatility
These short-term forces, however, are not expected to last long. In fact, they may set the stage for a stronger recovery, especially as physical demand rises and institutional interest returns.
Support Below $3,000: A New Floor for Gold?
UBS notes that strong support appears to be forming just below the $3,000 per ounce level, a psychological barrier that investors are watching closely.
“Price action has been very choppy and thinner liquidity has likely amplified moves,” Teves stated. “But support is emerging, and physical demand is picking up.”
This aligns with increased trading activity and rising premiums in Asia—particularly in China and India, where demand tends to surge during price corrections.
China and India Could Spark the Next Gold Rally
UBS highlights two key drivers for a rebound:
1. Seasonal Demand from India
India, one of the world’s largest consumers of physical gold, typically sees increased demand during wedding and festival seasons. The recent dip in prices may act as a catalyst, prompting higher retail and institutional buying.
2. Bullish Sentiment and Low Inventories in China
China is witnessing strong investor interest in gold as a hedge against currency devaluation and economic instability. The Shanghai Gold Exchange premium over global spot prices has reached a nine-month high, while trading volumes are the highest in a year.
UBS also noted that Chinese gold inventories are relatively low, and replenishment needs could drive fresh demand, further tightening the physical gold market.
Insurance Funds and ETFs Add to the Bullish Outlook
Another promising development is the entry of institutional investors, particularly insurance companies in China, who are now allowed to allocate up to 1% of their portfolios to gold. Though still in early stages, some firms have already initiated test trades, signaling what UBS believes could be long-term structural demand.
Additionally, gold ETF inflows have surged since early 2023, marking a shift in sentiment toward precious metals exposure in diversified portfolios. This trend is expected to continue as economic and geopolitical uncertainty escalates.
Physical Market Dynamics: A Tailwind for Gold
The interplay between ETF inflows, physical demand, and futures trading is creating an increasingly bullish environment for gold. UBS expects:
- Continued physical buying from Asia
- Retail investors returning amid lower prices
- Strategic institutional positioning ahead of potential monetary easing
With interest rates peaking or nearing cuts, real yields could decline, making gold more attractive relative to bonds and cash.
Frequently Asked Questions (FAQs)
1. Why did gold prices fall despite worsening tariffs?
The drop was mainly due to short-term profit-taking, liquidity-driven selling, and market relief from gold’s tariff exemption. The long-term fundamentals remain strong.
2. Is now a good time to buy gold?
UBS believes the current dip presents a strategic buying opportunity, especially for long-term investors. Support around $3,000 and rising demand from Asia could fuel a rebound.
3. What’s driving gold demand in China and India?
In China, economic uncertainty and low inventories are pushing institutional and retail demand higher. In India, seasonal trends and lower prices are encouraging physical gold buying.
4. How are ETFs influencing gold prices?
Gold ETFs reflect institutional and retail investor sentiment. Rising ETF inflows signal confidence in gold as a hedge, and they contribute to upward price pressure.
5. Will gold go back above $3,168 this year?
While short-term volatility is expected, UBS maintains a bullish outlook and sees the potential for new highs later in 2025, especially if macroeconomic risks persist.
Conclusion: A Dip or a Golden Entry? UBS Thinks the Latter
UBS’s analysis paints a bullish picture for gold despite recent weakness. The combination of macroeconomic instability, strong physical demand, and institutional interest could make this current dip a golden opportunity for investors.
From China’s rising investment flows to India’s seasonal buying and increased ETF inflows, all signs point toward a solid floor under gold prices. While volatility may remain in the near term, the long-term trajectory—according to UBS—is still pointing up.
For those sitting on the sidelines, this pullback might just be the ideal time to make a move.
Disclaimer:
This article is for informational purposes only and should not be considered financial advice. Investing in commodities, including gold, involves risk and may not be suitable for all investors. Always conduct your own research or consult with a licensed financial advisor before making investment decisions.
