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Gold hasn’t been much of a safe haven during the Iran war and the resulting energy shock, but its March slump may just be a temporary blip, according to one Wall Street strategist.

Mark Haefele, chief investment officer for UBS Global Wealth Management, stood by his bullish estimates for gold in a research note this week. The precious metal will rise 35% to $6,200 an ounce by the end of June, before scaling back to $5,900 an ounce by the end of the year, UBS forecast.

Gold continuous futures stood at around $4,580 an ounce early Tuesday morning, down 13% since the U.S. and Israel first attacked Iran on Feb. 28.

Most of that drop came in a brutal five-day stretch ended March 24. It was one of the largest falls over such a short interval in over 40 years, UBS noted. Bullion has been range-bound between around $4,400 and $4,600 an ounce since then.

The steep drop wasn’t without precedent—or logic. “History shows that gold does not always rally during periods of conflict, particularly in the early stages,” Haefele wrote.

Rising energy prices have increased the probability of either interest rate hikes or delayed cuts by central banks wary of inflation, UBS noted. Higher rates make yield-bearing assets like Treasury bonds more attractive at the expense of gold.

Bond markets are pricing in three interest rate hikes by the European Central Bank and the Bank of England in 2026 and no cuts by the Federal Reserve. UBS believes these estimates go too far, particularly since higher energy prices may also stunt economic growth. After the UBS note came out Monday, Fed Chair Jerome Powell’s indicated in a discussion at Harvard that the Fed is inclined to look past energy spikes.

“We still expect easing from the Fed this year,” Haefele wrote. “We also expect a renewal of demand for gold from investors and central banks, as the preference for liquidity stemming from the Middle East crisis abates.”

Timing the bottom for gold will be difficult, of course, but UBS doesn’t expect the recent pullback to last very long. The firm recommends investors that who like gold allocate a mid-single-digit percentage of their portfolio to the precious metal as a hedge and a way to diversify.

Write to Nate Wolf at nate.wolf@barrons.com

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