2012-08-01

UBS raised its one-month gold price target to $1,700 from $1,550, and its three-month estimate to $1,750 from $1,600 per ounce

The gold price continued to consolidate after last week’s gains on Tuesday, as it hovered near $1,625 per ounce in morning trading.  The spot price of gold rose to an intra-day high of $1,631.38 overnight, but pared its gains as the U.S. dollar rebounded against a basket of foreign currencies.  Nonetheless, the spot gold price remains higher by 1.6% in July and is on pace for its first set of consecutive monthly gains since last October and November.

The broader financial markets stabilized as well on Tuesday, as equities and commodities await the outcome of central bank meetings in the U.S. and Europe later this week.  While the majority of strategists and economists do not anticipate that the Federal Reserve to launch a third round of quantitative easing (QE3) at this week’s Federal Open Market Committee (FOMC) meeting, expectations have increased considerably for next month’s session.

This morning, gold strategists at UBS raised their short-term gold price targets in light of their forecast for further monetary easing by the Fed in the months ahead.  In a note to clients this morning, UBS raised its one-month gold price target to $1,700 from $1,550, and its three-month estimate to $1,750 from $1,600 per ounce.

“Our one-month target coincides with the Fed’s Jackson Hole symposium at the end of August,” the firm wrote, “which we think will be significant for policy expectations ahead of the September FOMC meeting.”

UBS went on to say that “A sentiment shift in favor of gold is gradually occurring amongst investors. And given very light spec positioning in the market at the moment, gold has the foundation in place for a decent break. This ties in with the improving technical picture, where a break above the $1631.60 would pave the way for a more prolonged rally back towards $1700.”

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