UBS cuts one-month gold price forecast 13% on possible US rate hike
Zurich-Switzerland (Aug 10) Piling on the bearish sentiment for gold UBS analyst Joni Teves on Monday cut the Swiss bank's one-month gold forecast by 13% to $1,050/oz, with the key driver lower a possible interest rate rise in the US.
"Our new price forecasts signal our view that there is scope for further downside in gold from here on the back of both macro and gold fundamental factors over a one-month time frame," Teves said.
The analyst said that the possibility of a US Federal Reserve interest rate increase in September was the key catalyst for the change to the forecast.
"We think weakness is likely going to build heading into the FOMC meeting in September. Nevertheless, selling firepower should be relatively limited...Any further weakness should encourage market participants to start seeing value in gold around these lower levels," Teves said.
Key physical markets -- i.e China and India -- have yet to react overly bullishly to the dollar price weakness.
Still, Teves said he believes that this could be set to change.
"In spite of relatively disappointing response from physical markets thus far, we expect an improvement in this market segment and lead a recovery further out, especially as seasonality kicks in," she said.
The bank said she believes that short-covering should eventually lead to gold back above $1,100/oz.
The bank cut its one-month silver price by 10% to $14/oz, platinum by 12% to $950/oz and palladium to $600/oz, down 10%.
On a three-month horizon gold was cut by 4% to $1,125/oz, silver by 2% to $15,50/oz, platinum down 7% at $1,050/oz with palladium at $680/oz, down 7%.
"For the rest of the precious metals, internal drivers remain limited right now and we expect this trend to continue -- as such, much of the direction over the relevant forecast period is likely to be driven by gold along with the broader commodity complex," the analyst said.