From "Rate Trading" to "Dollar Devaluation Trading": The Logic Behind Gold's Rally Has Shifted

UBS dissects the "two-act play" behind this 17% rebound: the first act is driven by central bank gold purchases, physical demand, and short-covering; the second act is triggered by the U.S. Treasury doubling its buyback of long-term bonds, fueling concerns over a fiscal credit crisis, shifting gold's pricing from the "real rate framework" to the "currency devaluation framework"—even with high rates, gold prices can still rise. The bank explicitly notes that upside risks to its medium-to-long-term forecast are increasing, with the upside scenario targeting as high as $6,500.