(Kitco News) – Central bank buying, growing fiscal deficits, lower U.S. interest rates, and ongoing geopolitical risks will propel gold prices to $5,000 by the end of the first quarter, even as the broader commodities complex rally continues, according to Dominic Schnider, Head of Commodities & APAC Forex CIO at UBS Wealth Management.
“Commodities are set to play a more prominent role in portfolios in 2026,” Schnider wrote on Monday. “Our forecasts point to attractive returns, supported by supply-demand imbalances, heightened geopolitical risks, and long-term trends like the global energy transition. Within the asset class, we see particular opportunities in copper, aluminum, and agriculture, while gold remains a valuable portfolio diversifier.”
He said that tight supply and rising demand will likely support higher prices for many commodities in 2026.
“Both copper and aluminum are projected to encounter further supply shortages that may push prices higher,” Schnider said. “The global transition to clean energy and electrification continues to drive demand for these metals, making them a key structural investment. For crude oil, we expect prices to start recovering in the second half of the year. The current surplus should diminish with solid demand growth and moderating non-OPEC+ supply amid limited OPEC+ spare capacity.”
He also expects the gold rally to continue this year. “Gold should post further gains, in our view, supported by central bank buying, large fiscal deficits, lower US real interest rates, and ongoing geopolitical risks,” he said.
Schnider said that commodities play a valuable role in investor portfolios, but they can face periodic volatility. “Returns are generally strongest when supply-demand imbalances or macro risks—like inflation or geopolitical events—are elevated,” he said. “In such periods, broad commodity exposure can help diversify portfolios and protect against shocks. When the outlook is favorable, we typically suggest an up to 5% portfolio allocation to a diversified commodity index.”
He noted that commodities were among the biggest movers in markets once news broke that the US had ousted former Venezuelan President Maduro. Spot gold opened sharply higher in the wake of the military action, and the yellow metal has continued to make gains in the days since, trading as high as $4,491.20 on Tuesday.
Schnider has a very constructive price forecast for gold in this environment.
“We now expect gold prices to rally to USD 5,000/oz by March, stay there to September, and moderate towards USD 4,800/oz by the end of 2026,” he said.
“Commodities are poised for attractive returns in 2026, in our view, offering portfolio diversification amid supply-demand imbalances, geopolitical risks, and the global energy transition,” Schnider concluded. “We like broad commodities exposure, gold, and select commodity-linked equities.”
On Dec. 29, commodity strategists at UBS said any increase in political or economic turmoil surrounding the U.S. midterm elections could push the yellow metal to $5,400.
The Swiss banking giant published in a report last week that it was raising its gold price target to $5,000 per ounce for the first three quarters of 2026. UBS strategists then expect the gold price to pull back to $4,800 per ounce by the end of 2026 – $500 higher than the previous forecast of $4,300 per ounce.
UBS expects demand for gold will steadily increase in 2026, supported by low real yields, ongoing global economic concerns, and domestic policy uncertainties in the United States – particularly those related to the midterm elections and mounting fiscal pressures.
“If political or financial risks increase, the gold price could climb to $5,400 per ounce (previously expected at $4,900 per ounce),” the strategists wrote in the report.
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