UBS updated its gold prices forecast, projecting that the yellow metal could reach a high of over $3,200 before stabilizing at elevated levels in the coming years. The move represents an increase from their previous peak prediction, with UBS citing several factors for the more optimistic outlook.

At 10:30 GMT, XAU/USD were up 0.52% on the day, exchanging hands at $2,898.25.

Gold has already seen record-high prices within just six weeks since the start of 2025. Analysts point to deep-rooted bullish sentiment, underinvestment by investors, and strong official sector demand as key drivers for the anticipated rally in gold prices.

"It seems that so much has already happened and it is only February. While this sentiment probably applies across financial markets in 2025, gold in particular has seen unprecedented market dislocations and record-high prices in just over 6 weeks since the start of the year." UBS strategist Joni Teves said in a note.

"Our latest assessment of market conditions prompts us to update our gold views and revise our price forecasts higher. These changes bring forward the peak to the latter part of 2025, with gold reaching a higher level than what we had before."

Investors, having missed short-lived buying opportunities in 2024, might adopt a 'carpe diem' approach, seizing on market corrections more promptly. The UBS forecast suggests that liquidity issues could further amplify gold rallies, making the market especially sensitive to increases in physical demand.

While UBS has raised its expectations for gold, the firm maintains its forecasts for white precious metals such as Silver Futures , Platinum Futures , and Palladium Futures . Silver and platinum are expected to outperform gold in terms of percentage gains, benefiting from their correlation with gold and favorable supply and demand dynamics.

However, silver may face higher volatility due to its dual nature as a precious and industrial metal. Platinum's appeal might be limited by less liquid market conditions and a longer investment horizon.

Palladium is projected to experience interim spikes as the market remains in deficit for a few more years, making prices susceptible to supply concerns.

Nonetheless, the absence of a long-term bullish narrative is anticipated to cap prices, keeping the market within a broad range, Teves concluded.