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UBS Raises Gold-Price Forecast Yet Again, Predicts $1,730

UBS Raises Gold-Price Forecast Yet Again, Predicts $1,730

 Karenochotnicka | Dreamstime.com

By    |   Tuesday, 01 October 2019 06:28 PM

UBS has raised its forecast for the price of gold for the second time in less than two months.

The Swiss bank predicts the price for the yellow metal could reach as high as $1,730 a troy ounce next year, up $50 from an August forecast, a recent UBS report states. The note last month pointed to the possibility of $1,680 over the same timeframe, Forbes.com reported.

If gold did soar that far it would be 17% above the recent price of $1,483.

“An environment of negative and lower-for-longer real rates, slowing growth with downside risks, and elevated uncertainty strengthens the case for holding strategic gold allocations,” the UBS report said.

The UBS report also notes that ETF holdings, such as those in the SPDR Gold Shares (GLD) have been growing steadily.

“The other bullish blessing is that most of the investor love for the metal has not come from individual investors. Individuals are well-known for buying and selling assets of any kind at precisely the wrong time. That means that their relative absence from gold investing is a good thing for investors who want to see the price of bullion rally,” Forbes explained.

“[...] participation so far has largely been limited to institutional investors and the official sector,” Forbes quoted the UBS report as saying.

Meanwhile, the Mining Journal explained that two global factors could also push the precious metal higher.

"In India, the monsoon season brought higher rainfall than usual, which will boost agricultural incomes and thus drive increased purchase of gold," Mining Journal said.

"Meanwhile in China, forward contracts have surged to record highs on the Shanghai Gold Exchange, and there has been a build-up in China gold ETF holdings since late May, suggesting a pick-up in investor interest," the report said.

"With gold prices holding well, the fear-of-missing-out is likely rising," Joni Teves, strategist at UBS's global research team, was quoted as saying by MiningJournal.com. "This is encouraging and implies that any downward pressure coming from macro factors over the remainder of the year is likely to be absorbed by fundamental demand," said Teves.

"The continuation of gold's uptrend should eventually attract more investment interest as well as momentum buyers," said Teves.

To be sure, investors had been largely pricing in no further rate cuts going into a Fed meeting later in the month, on stronger economic data and reduced fears of a global recession. The Fed last cut interest rates in September for the second time this year.

While gold had been testing support below $1,500 due to a repricing of Fed rate cut expectations, “we think that risks remain skewed to the upside between now and year end,” UBS analysts said in a separate note quoted by Reuters.

“Fundamentals remain tight and we remain bullish long term, but there should be some opportunities to enter at better levels amid downside risks to economic data and lingering trade uncertainty,” UBS analysts said.

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UBS has raised its forecast for the price of gold for the second time in less than two months.
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2019-28-01
Tuesday, 01 October 2019 06:28 PM
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