UBS lowers gold price forecast, expects further pressure on complex

Otmane El Rhazi from The Bullion Desk.

UBS has downgraded its one and three month forecasts for precious metals, it said in a note on Monday.

“Within a three-month time-frame, we expect the precious metals complex to come under pressure mainly on the back of gold, as market participants anticipate the first Fed rate hike,” the bank said.

The one-month gold price forecast was revised to $1,200 per ounce, from a previous $1,240, while the three-month estimate was altered to $1,170 from $1,200.

It was last at $1,172/1,173, having come under pressure from a stronger dollar.

The dollar found support Friday after US total non-farm payroll employment increased by 295,000 in February and the unemployment rate edged down to 5.5 percent from 5.7 percent, which was significantly better than the forecast for the addition of 240,000 jobs and a 5.6 percent unemployment rate.

“We think some consolidation is now warranted at this point as the market awaits fresh catalysts,” said the bank.

“Seasonality suggests that gold may be vulnerable to the downside up ahead. According to historical patterns, physical demand tends to be slow during this period, but some restocking in China and the anticipation of the Akshaya Tritiya festival in India in late April could offer some support to the market in the weeks ahead, limiting further downside,” it added.

Silver’s one-month forecast was lowered to $16.25 from a previous $17.4, and the three month price was put at $15.8 from $16.5.

Silver is expected to continue to take direction from gold as there are limited internal drivers at this point.

Platinum, which is trading around the lowest since July 2009 at $1,150 per ounce, saw its one-month average downgraded to $1.250 from $1,300 and three month to $1,200 from $1,350.

The previous forecasts, said UBS, were overly ambitious, and while new forecasts reflect a downgrade from previous, they still show uplift from spot.

“This reflects our view that there are decent near-term upside risks after platinum shorts aggressively added to positions in recent weeks and reached an all-time high,” the note said.

Palladium was the only one to see an increase higher, one month was changed to $820 from a previous $800, but three months was downgraded to $790 from $850.

“Although our new one-month price expectation shows a lift from our previous forecasts, relative to spot it reflects more the view that palladium is likely to see some consolidation around recent levels following the sharp rally in late February,” said the note.

(Editing by Martin Hayes)

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