Investing.com -- Gold prices reached a new all-time high at $3,004.94 per ounce, but UBS strategists believe the bullion has further upside room, revising their price target to $3,200 per ounce from the $3,000.

The precious metal has seen a strong surge of 14% year-to-date, following a 27% gain in 2024. Gold last crossed a "thousand dollar" threshold in August 2020, during a pandemic-driven rally.

“With the price now reaching our long-held target of USD 3,000/oz, the main question is whether the rally will continue. We think so, as long as policy risks and an intensifying trade conflict continues to spur safe-haven demand,” strategists led by Wayne Gordon said in a note.

UBS has increased the likelihood of a broad-based, protracted trade war to 35% from 25%, especially considering the Trump administration’s upcoming trade investigation findings, set to be released on April 2.

The shift in market sentiment, from relying on the "Trump put" to a "Fed put," reflects growing recession risks and a souring of U.S. sentiment indicators. These factors have led to expectations of additional cuts from the Federal Reserve.

UBS notes that while the market is technically overbought in the short term, investors remain cautious regarding U.S. equities and confident in gold’s stability.

A step back from trade policies by President Trump could reduce the defensive buying of gold, with technical support seen at $2,850 per ounce.

However, renewed inflows into ETFs, particularly the world’s largest gold exchange-traded fund (ETF), SPDR Gold Trust (P: GLD ), which reported holdings of around 908 metric tons in February—the highest since February 2023—support the metal’s upward trajectory.

“Ongoing momentum in these flows alongside demand for bars and coins are as important as ever,” the strategists said.

Central bank activity also plays a pivotal role in supporting the gold market. Notable gold reserve increases have been made by the People’s Bank of China and the Central Bank of Poland, the top buyer in 2024.

UBS projects that purchases by reserve managers this year could be close to the levels of recent years, roughly 1,000 metric tons annually.