UBS backs de-dollarization trend, lifts gold target to $5,400 an ounce
UBS is adopting a long-term view on dollar weakness, indicating a structural trend rather than a fleeting concern. This outlook suggests persistent inflows into gold and selected currencies, driven by factors such as central bank reserve diversification, highlighted by notable gold purchases from the People's Bank of China. The desk views this as a call to not just react to price movements but build a position in a de-dollarizing environment, expecting gold prices to surge to $5,400 an ounce over the next year due to sustained demand. Per the full note source, while there's potential near-term support for the dollar from geopolitical tensions and rising oil prices, UBS emphasizes that the medium-term trajectory is one of depreciation fueled by U.S. fiscal challenges and policy uncertainty.
What the desk is arguing
UBS's position reflects a conviction that dollar weakness will persist beyond short-term fluctuations, based on significant shifts in reserve management among central banks, particularly highlighted by the People's Bank of China's 20 metric-ton gold purchase in July 2023, its largest since October of the previous year. This renewed focus on gold as a safe haven contrasts with a broader trend toward commodity investment, reinforcing UBS's forecast that gold could reach $5,400 per ounce within the next 12 months.
The desk's analysis aligns closely with prevailing concerns about the U.S. fiscal outlook, as the DXY dollar index has recently seen a 2.4% decline attributed to these worries. UBS's selective currency strategy, favoring the pound, Norwegian krone, New Zealand dollar, and yuan, indicates an understanding of the nuances needed in the current market landscape, which is fraught with geopolitical risks that could intermittently support dollar valuations.
Where it sits in our coverage
Currently, the consensus target for EUR/USD across various firms is set at 1.1700, with a range from 1.1200 to 1.2000. Notably, firms like ubs and morganstanley are positioned on the upper end with targets of 1.2000 by March 2026.
This aligns well with UBS's broader expectation of dollar depreciation, reflecting an optimistic view on currencies closely tied to commodities or those benefiting from a weakening dollar. Given that UBS's forecast matches the upper bound of the spread, it suggests a stronger conviction in their outlook compared to some peers.
How other firms see it
Several firms, including ubs, morganstanley, and ing, are aligned in their positive outlook on the euro relative to the dollar as they foresee a gradual weakening of the greenback. Conversely, some firms like danskebank and hsbc maintain a more cautious stance against EUR/USD strength, suggesting potential volatility ahead.
This outlook on EUR/USD is particularly relevant in light of the broader macroeconomic environment, including ECB monetary policy, which continues to influence currency movements. Additionally, the gold trade appears to play a significant role in the narrative surrounding dollar depreciation, adding another layer to the currency dynamics at play.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01UBS characterizes dollar weakness as a structural theme rather than a temporary setback.
- 02Gold prices are expected to escalate to $5,400 per ounce, driven by strong central bank demand and ETF inflows.
- 03The geopolitical landscape adds complexity, offering potential short-term support for the dollar amid long-term depreciation concerns.
- 04A selective approach to currency positioning favors specific currencies over a blanket short against the dollar.
Market implications
Traders should monitor EUR/USD closely as it may reflect the broader commodities narrative, particularly with a focus on targets around 1.2000. Additionally, any developments in central bank policies, especially from the ECB, could provide further context for short-term trading decisions.
Risks to this view
A significant shift in geopolitical tensions leading to a stronger dollar or unexpected U.S. fiscal stability could challenge the prevailing bearish outlook on the dollar. Furthermore, a significant rise in Fed rate hike bets could negate the bullish positioning in gold and commodities.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
ING | Bullish | 1.1800 |
UOB | Bullish | 1.1800 |
Rabobank | Bullish | 1.1800 |
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. --- 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.
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