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UBS Lowers Gold, Silver Forecast To Reflect Recent Drop
By Alex MacDonald
Published October 03, 2011
| Dow Jones Newswires
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--UBS cuts 1-month and 3-month gold and silver prices to reflect downward price move
--Says gold has the potential to rally on short covering as Comex gold net positions grow
--A potential catalyst for gold is the European Central Bank decision on Thursday
(Adds gold and silver price in paragraph 3, Comex long and short positions in paragraphs 7-8.)
LONDON -(Dow Jones)- Investment bank UBS AG (UBS) Monday lowered its spot gold and silver forecasts to reflect a recent drop in both precious metal prices, but said the potential for a gold price rise remains strong.
UBS lowered its 1-month average spot gold price by 9% to $1,775/oz and its 3-month average spot gold price by 7.1% to $1,950 a troy ounce. It also lowered its 1-month average spot silver price 30.4% to $32/oz and its 3-month average spot silver price 30% to $35/oz.

At 0844 GMT, spot gold was trading up 1.5% at $1,655.35/oz while spot silver was up 2.4% at 30.757/oz.
"Our core bullish view on gold remains unchanged and the light nature of [speculative] positioning is a big positive, but our previous one-and three-month [prices]...are overly ambitious given the recent slowdown in market momentum," UBS said.
It also noted that it sees the gold/silver ratio strengthening in the months ahead as gold outperforms.
"The 'clean' nature of current spec positions, along with physical and long-term demand, is creating a very healthy foundation for gold to climb from," UBS said. "We expect physical demand to be quite decent in the coming days, barring China where markets are closed for the week, but buyers there should return with vigor after the holidays."
The bank said that net long positions on Comex gold dropped 5.2 million ounces to 19.98 million ounces, according to the latest weekly Commitment of Traders Report. This marks the lowest net long position since July 2009 and the largest weekly percentage drop in the net long position since August 2008, according to UBS.
Conversely, the number of short positions on Comex grew 12% mainly in the non-commercial category, thus raising the potential for a short-covering rally if upcoming data releases and events are positive for gold, the bank said.
UBS said Thursday's European Central Bank's interest rate decision will be the next closely watched event. The bank expects the ECB to cut its interest rate by 50 basis points.
Copyright © 2011 Dow Jones Newswires


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