UBS: The current pullback in gold may present a rational entry opportunity

On April 3, UBS released an on-site research report stating that although the gold price saw a pullback from late February to March, the underlying logic behind China’s gold demand has not been weakened. Instead, it has continued to strengthen due to structural changes, and the long-term bullish foundation remains solid.

The report notes that current market sentiment is influenced by macro concerns, including a softening of the Middle East situation, cautiousness in the U.S. economy, and energy price shocks. These factors have led to short-term weakness in prices, but investors have not broadly denied the long-term value of gold. The three clear drivers supporting demand are: first, tax policy guidance that directs funds away from jewelry consumption toward tax-exempt investment gold; second, bank digitized gold custody programs that lower participation barriers and improve liquidity; and third, insurance funds pilot programs that have been launched, allowing asset managers to allocate 1% to gold. At present, about half of participating institutions are already active. Trading activity has been reflected in the Shanghai Gold Exchange, but overall quotas have not yet been fully released, leaving substantial room.

In addition, continued inflows into gold ETFs, a rebound in spot and forward trading, firm domestic premiums, and a smooth supply chain all confirm the resilience of demand. UBS emphasized that future upside potential depends on the expansion of the insurance funds pilot and an increase in quotas. While there are areas of expertise and interest-free barriers, demand for hedging has already taken the lead.

The report also reminded that slowing silver demand and weak platinum imports reflect differentiation in industrial momentum, which in turn reinforces gold’s safe-haven logic. Overall, the current pullback may be a rational entry opportunity, but investors should remain cautious.