The gold market has recently undergone a significant correction. Building on this, UBS Group has further lowered its short-term outlook for gold prices. The bank's analysis indicates that US economic data has outperformed expectations, coupled with a postponement of the Federal Reserve's rate cut timeline. These two factors are exerting dual pressure on the gold market, with gold prices expected to remain at risk of decline over the coming months.

Despite a cautious short-term outlook, the bank remains optimistic about the long-term trend for gold. Analysis suggests that continuous gold purchasing by global central banks and the potential deterioration of the US fiscal situation will provide long-term support. However, in the latest research report, strategists warned that gold prices may face further declines in the short term, with a projected drop between $300 and $900. Target prices could align with the range of $3,850 to $4,000 per ounce.

Multiple factors contribute to the recent weak performance of gold prices, among which the fading geopolitical risk premium is significant. The market originally expected escalating tensions in the Middle East to boost safe-haven demand, but gold's reaction was muted, prompting some investors to take profits. Against this backdrop, gold prices have returned to being dominated by traditional macro factors such as USD trends and real interest rates. Since hitting a historical high near $5,600 per ounce earlier this year, gold has eroded most of its year-to-date gains.

In terms of economic data, the latest non-farm payrolls report far exceeded market expectations, demonstrating that the US labor market remains resilient. This data reinforced market bets on the Fed maintaining high rates for longer or even hiking again within the year. A high-interest rate environment is generally unfavorable for gold, as the opportunity cost of holding gold increases with rising real yields on US Treasuries. In fact, the bank had already lowered its gold target price in May of this year, and subsequently strong economic data made this further adjustment inevitable.

Notably, the bank has not abandoned its baseline judgment of gold price increases over the next twelve months. Global central banks increasing gold holdings remains one of the most important long-term support forces in the market. Meanwhile, the expanding US fiscal deficit and debt burden are expected to drive more investors to allocate gold to hedge against long-term risks. The bank specifically noted that if signs of easing in US-Iran tensions appear, it could become a catalyst for gold to rise again. As international oil prices fall, global inflationary pressure is expected to ease, thereby weakening market concerns about further rate hikes.

The core prediction remains based on the expectation that the Fed will eventually restart the rate cut cycle. It is estimated that the Fed will cut rates by approximately 50 basis points cumulatively by 2027, while US economic growth will fall below long-term trend levels. Focus this week will shift to the Fed interest rate decision and the inaugural policy meeting of the new Chair. If more hawkish signals are released, gold may continue to face pressure in the short term. However, if the market begins to re-price the future rate cut path, gold may hope to shake off recent weakness. For gold investors, the biggest variables in the coming months remain the direction of Fed policy and whether the US economy can continue to maintain its current strong performance.