Gold Falls Below $4,600 Mark, Silver Plunges Over 6%, UBS Still Sees New Gold Price Highs This Year.

Tradingkey - Gold and silver prices fell significantly during the late Asian trading session on May 15. Spot gold ( XAUUSD) dropped by more than 2% at one point, hitting a low of $4,556.45. As of press time, it was still down 1.74% at $4,571.33. Spot silver ( XAGUSD) fell by more than 6% at one point, touching a low of $77.56. As of press time, it was still down 5.92% at $78.52.

The combination of rising oil prices and higher U.S. Treasury yields squeezed the valuation space for non-yielding precious metals, serving as the primary driver for this round of gold price declines.

[Source: TradingView]

Currently, the war in Iran has entered its tenth week, the Strait of Hormuz remains closed, and oil prices stay elevated. Brent crude prices were recently hovering near $107; these high oil prices have fueled risk-aversion sentiment, driving capital back into U.S. dollar assets.

On the other hand, U.S. retail sales data exceeded expectations, indicating resilient domestic demand and easing recession concerns. This reduced the necessity for the Federal Reserve to cut interest rates in the short term, providing fundamental support for the dollar. The U.S. Dollar Index rose 0.3% on Thursday to hit a two-week high, which directly increased the cost of holding dollar-denominated gold.

The combination of these factors pushed up U.S. Treasury yields and further pressured non-yielding assets, including gold and silver. This is one reason why gold prices fell even as geopolitical conflict risks between the U.S. and Iran persist.

James Steel, Chief Precious Metals Analyst at HSBC, also stated that surging oil prices pushed up inflation expectations, while U.S. Treasury yields and the dollar strengthened in tandem. With equity markets under pressure, the market's urgent need for liquidity led investors to sell off gold.

Overall, the gold market is navigating a complex environment of intertwining factors. A stronger dollar and rising expectations for Fed rate hikes create downward pressure; meanwhile, continued uncertainty from the Middle East conflict and potential volatility from major diplomatic breakthroughs provide significant support for gold.

Looking ahead, UBS stated that sovereign gold purchases have become the primary support for gold prices. It expects prices to recover and continue hitting new highs this year. Analysts at the bank noted that while recent price volatility sparked concerns over potential gold reserve sales, demand from the official sector remains stable. Preliminary data from the World Gold Council shows that central bank purchases in the first quarter of this year remained slightly above the levels of the same period last year.

UBS reiterated its gold price forecast, expecting prices to reach $5,600 per ounce this year, representing a 22% upside from current spot levels.

UBS's outlook for silver has cooled, with a broad downward revision of price forecasts: the Q2 2026 silver price projection was lowered to $85 (previously $100), and the September target was set at $85 (previously $95).

The bank stated that silver's high price levels this year have suppressed demand in the photovoltaic industry and significantly restrained consumption in silverware and jewelry. Furthermore, the market supply-demand gap is expected to narrow substantially, directly weakening silver's cross-cycle upward momentum.

It is worth noting that while silver and gold belong to the same precious metals category and share high similarity in core pricing logic, silver's monetary attributes are significantly weaker than gold's. Due to its smaller market capacity and much higher volatility, silver is more prone to triggering concentrated profit-taking by investors during market fluctuations.