Gold predictions: UBS cuts gold price target
Investment bank UBS on Tuesday updated its short-term gold prediction for the gold price following the precious metal’s recent volatility.
“Given that gold had already lost so much, few clients were calling for another aggressive push lower,” said UBS.
Last week, the spot gold price fell to a two-year low due to several negative price drivers, including fears Cyprus may sell some gold reserves and disappointing economic data out of China, where the metal is bought as a store of wealth.
Joni Teves, UBS precious metals analyst, updated the bank’s one-month price target to $1,425/oz from $1,725/oz previously, and its three-month target to $1,500/oz from $1,850/oz.
She said that gold reclaiming the $1,400/oz level is what the market needs right now to rebuild the confidence and trust that was damaged during the recent sharp sell-off.
“The strong response from physical markets is a significant component impacting sentiment, as well as an important reminder that this demand can offer support during times of weakness–a fundamental element of the market that is not to be underestimated,” she said. “Nevertheless, it will take time for the market to fully heal, and for conviction to be regained.”
Looking into the weeks ahead, she said she sees prices consolidating around current levels in the absence of clear price drivers and while investor confidence is slowly clawed back.
“The mood amongstU.S.clients we met with over the past week was generally negative, with just a few taking a more neutral stance following the sharp correction,” said Ms. Teves.
“Large and persistent [gold] selling in the exchange-traded fund space is an important source of concern. Interestingly, though, there are indications that not all of this flow reflects an outright exit from gold,” she added.
In this regard, she said there is increasing interest, albeit small in the context of overall liquidations, in converting exchange-traded fund holdings into other types of gold exposure, such as allocated accounts.