Investing.com -- Despite a recent consolidation in gold prices since hitting an all-time high of $3,500 in late April, UBS analysts maintain that "gold’s pause bodes well for the next leg higher," as "bullish gold sentiment is unchanged."

Market participants have been reacting to "volatile developments on U.S. tariffs, economic data prints and the corresponding implications for Fed policy," said the bank in a note to clients.

UBS notes that "High levels of uncertainty around U.S. tariffs, fiscal policy and the Fed’s consequent response reinforce the appeal to diversify portfolios, wherein gold stands out as an attractive option."

The analysts suggest that "Liquidity conditions could amplify price action" for gold, meaning it "likely does not take a lot of volume to move the price in the current environment."

They point out that "Continued buying from the official sector, inflows into ETFs and relatively robust physical investment interest suggest metal being made unavailable to the market," which supports a potential move higher.

UBS also addressed whether investors are shifting from gold to white precious metals like platinum and palladium.

According to the bank, platinum has extended its rally, outperforming gold and silver, and the platinum market is "increasingly showing signs of stress."

While "gold’s ratio to silver and platinum moving in favour of the white metals recently," and futures open interest shows a decline in gold and an increase in silver and platinum, UBS states that "it is hard to know for sure whether market participants are doing ratio trades, it is also hard to rule out given the price action."

However, the overall sentiment for gold remains positive, with its current pause seen as a healthy development for future gains.