Gold Price Faces "Very Weak Investor Sentiment"

US Fed comments lead UBS to cut gold price forecast by 10%...

 

INVESTMENT BANK and bullion-market maker UBS has cut its 2013 gold price forecast by 10% after this week's US central bank meeting led to a sharp drop in precious metals.

 

In light of Federal Reserve Chairman Ben Bernanke’s comments about reducing monetary stimulus if the economic situation continue to improve, UBS's precious metals analysts have cut the bank's 2013 price forecast for gold down to an average price of $1400 an ounce for this year.

 

"[Bernanke] mentioned a 7% unemployment rate as a possible threshold for ending asset purchases which could potentially be reached by mid-2014," notes Joni Teves, UBS analyst.

 

The likelihood of withdrawing stimulus “creates an increasingly difficult environment for gold,” Teves said.

 

The bank lowered its one-month forecast for gold prices by 12% to $1250 an ounce. Its three-month forecast fell 10% from $1500 to $1350 an ounce. 

 

UBS's revision comes after gold prices slumped sharply this week to its lowest levels since September 2010. The slump was triggered by US Federal Reserve chairman Bernanke's comments.

 

The US Fed's changing stance presents "significant obstacles" to gold "that perpetuate an already very weak investor sentiment," says Teves.