Gold prices are climbing again, with spot bullion up about 1.6% so far on Monday, as a mix of geopolitical risk, interest-rate expectations and strong demand continues to support the rally.

In a note to clients, UBS strategists led by Giovanni Staunovo noted that gold has recovered from a steep decline in late October and is once again reinforcing its status as one of the strongest-performing assets this year. 

The bank notes that bullion is consolidating gains after a sharp advance, with prices sitting at record levels.

One key driver is rising geopolitical uncertainty. UBS points to renewed tensions after U.S. President Donald Trump ordered a “blockade” of sanctioned oil tankers linked to Venezuela, alongside reports that Washington is preparing additional sanctions on Russia’s energy sector if peace talks over Ukraine fail.

UBS says gold prices have risen over the past week “amid renewed geopolitical uncertainty,” highlighting the metal’s role as a hedge during periods of global stress.

A second factor is the outlook for U.S. interest rates. UBS notes that the U.S. real interest rate, “the opportunity cost of holding non-yielding assets like gold,” has fallen to its lowest level since mid-2022. 

The bank adds that gold is “supported by the outlook for U.S. rate cuts,” which typically boosts demand for bullion.

Finally, UBS highlights persistent buying from central banks and investors. 

“Demand from central banks and investors is still near record highs,” UBS wrote, adding that it expects central bank purchases of 900 to 950 metric tons this year. 

“In our view, gold’s store-of-value characteristics, liquidity, and ability to hedge against shocks justify a continued place in well-diversified portfolios,” UBS declared.