Gold is marching toward $1,300
The investor love affair with gold seems to have gotten a bit lukewarm recently, after a pretty strong start to the year.
That’s why yesterday’s big move toward a key technical level got a few out there excited. The precious metal came close to its 200-day moving average on Tuesday, the closest it has been since late February.
According to some, a sustained move above that popular indicator could mean further gains for the asset — though others say it could also mark a point where prices begin to struggle.
Reaching that 200 DMA at all may be tough today. Gold is looking set to bust a three-session win streak, which has been driven by lower U.S. bond yields and softer U.S. economic data.
That leads us to our call of the day, which urges gold investors to curb their enthusiasm just a bit. UBS strategists Joni Teves and Roque Montero have pared their 2017 forecasts for the precious metal to an average $1,300 an ounce, from $1,350. For next year, they’ve cut the average to $1,325, from $1,450.
The strategists explained that they based their bullish case for gold on interest rates not moving up too quickly, the dollar staying weak against developing market currencies and jitters over global economic growth — things that encourage investors to take cover in the precious metal. While their core gold view remains intact, events over the past few months have shaken up their price view.
What’s changed?
“Firstly, the pickup in gold interest in Q1 was slower than we expected,” the UBS team says. “Secondly, a faster pace of Fed tightening than previously expected presents downside risks for gold, although more from the impact on sentiment than how we expect Fed policy to ultimately affect rates.”
Europe could produce some downside price risks, especially as the political clouds clear and economic data gets better. That in turn could push up the pressure on global bond yields, providing a better alternative to gold, said the strategists.
Still, they toss a bone to gold bugs: “Gold allocation remains valid amid moderate rates, modest growth acceleration and macro uncertainty … Gold remains under-owned and macro conditions should continue to encourage broader participation,” say Teves and Montero.
Source: MarketWatch
