Gold Below $1,200 May Be What’s Needed, UBS Lowers Short-Term Forecast

New York (Mar 9)  As gold prices struggle to gain momentum following Friday’s strong U.S. employment data, the metal is expected to consolidate further, and hanging below $1,200/oz may just be what it needs to recover, said analysts at UBS.

“We think some consolidation is now warranted at this point as the market awaits fresh catalysts. Seasonality suggests that gold may be vulnerable to the downside up ahead,” they said in a research note published Monday.

“Prices below $1200 could well be what is needed right now to encourage more activity across physical markets and aid a recovery towards the psychological level.”

Shifting focus to the ‘elephant in the room’ – U.S. Federal Reserve interest rate hikes – UBS analysts argued that although pressure will be put on gold prices, the downside potential may be limited.

“UBS' house view is more aggressive and closer to the Fed's outlook than the street; as the market's view converges with the Fed's thinking, positions in gold are likely to be adjusted accordingly,” they said.

“Relatively neutral YTD positioning also suggests that there isn't a huge amount of firepower to push the market lower too aggressively. We therefore expect the downside to be ultimately contained,” they added.

The analysts said they have reevaluated their short-term forecasts for the metals as they expect the precious metals complex to consolidate and come under pressure for the next few weeks, following gold’s lead.
“For gold, we change our one-month target to $1200 from $1240 previously and change the three-month forecast to $1170 from $1200,” they said.

“We set our new short-term forecasts for silver at $16.25 from $17.4 for one month and at $15.8 from $16.5 for three months,” they added.

Source: KitcoNews