Union Bank of Switzerland (UBS) raised its one-month gold forecast to US $1,700 an ounce from US $1,550/oz and its three-month forecast to US $1,750 an ounce from US $1,600.
According to the Zurich-based bank, a greater chance for monetary stimulus from the Federal Reserve should support gold prices, with the yellow metal seen rising to US $1,700 an ounce in a month.
Edel Tully, precious metals strategist at UBS stated that, ''Our one-month target coincides with the Fed’s Jackson Hole symposium at the end of August, which we think will be significant for policy expectations ahead of the September federal open markt committee (FOMC) meeting.''
Investors are interested in buying gold but they are awaiting some signal from the Fed Reserve on the outlook for monetary policy.
There is low speculative involvement, judging by the Commodity Futures Trading Commission’s data, which means there is room for more of this buying to enter. Further, technical charts favor a rally, and a move above the US $1,631.60 could mean a rally back towards US $1,700, she added.
The three-month view takes into account action by the Fed and possible uncertainty surrounding the US November presidential elections and the looming US fiscal cliff where potential tax hikes and spending cuts occur.
Tully also noted that, seasonal factors also support a rally in gold as the next three months are typically the strongest months for the metal.“There is no guarantee that historical patterns play out, but this could well become a factor this year, particularly given the macro-economic events lined up ahead,” UBS concluded.
The US gold futures prices are trading modestly higher on the comex division of the New York Mercantile Exchange in early dealings on Tuesday. The market place is subdued ahead of some key central bank meetings this week, and the US jobs report on Friday.
December gold last traded up US $2.20 at US $1,626.20 an ounce. Spot gold was last quoted up US $1.20 an ounce at US $1,624.10. September comex silver last traded up US $0.072 at $28.105 an ounce.
Focus of the market place this week remains on the two-day FOMC meeting of the US Fed Reserve, which starts Tuesday and ends Wednesday afternoon, and the European Central Bank’s policy meeting and press conference on Thursday.
The Bank of England also meets to discuss its monetary policy, with results on Thursday. Market watchers will be closely scrutinizing these central bank meetings for any fresh clues on the implementation of quantitative easing of monetary policies.
The ECB is expected by many to announce a fresh monetary stimulus package. Such would be at least initially bullish for many markets, including the gold and the silver.