Rising interest rates and a strong dollar have left gold in the dust this year. But UBS forecasts a rebound in prices for the precious metal, saying it will rise 13% by next winter. Gold has traditionally been considered an inflation hedge. But rising interest rates have drawn investors away from bullion by raising the opportunity cost of holding the zero-yield asset. Gold has declined 18% since March after prices topped $2,000 an ounce, close to an all-time high. Spot gold was trading around $1,676 an ounce on Monday, and UBS sees prices hitting $1,900 an ounce by the end of 2023. The Swiss investment bank believes the risk-reward of owning the precious metal will increase “as the current Fed tightening cycle ends.” In a note to clients on Nov. 7, UBS said gold prices have historically tended to rally 19% for every 1% cut in real rates. A “real rate” is an interest rate that has been adjusted to remove the effects of inflation. UBS is not only forecasting that the Federal Reserve will pause rate hikes by February, but also expects the central bank to cut interest rates by 175 basis points by the end of 2023. “We think gold should benefit and therefore holding a long gold position would offer an attractive risk-reward as the tightening cycle ends,” their analysts said. UBS admits that gold prices could see headwinds in the next few months thanks to the Federal Reserve signaling a potentially higher-than-expected terminal rate — the point when the Fed stops raising rates. “Attempting to pick the bottom is always tricky,” said UBS’s Precious Metals Strategist Joni Teves in the research note. “That said, we think any weakness in gold in the coming months should ultimately offer opportunities to position for a move higher in prices over the course of 2023, as the Fed pauses tightening and eventually shifts to a more dovish stance.” UBS also pointed toward support for gold prices caused by demand from institutional investors. Central banks have been net buyers of gold amid a broader trend of diversification away from the U.S. dollar. The Russian invasion of Ukraine earlier this year and ensuing sanctions have reinforced many countries’ strategies.