UBS, the Swiss investment bank has lowered its 1-3 month forecasts for gold in expectation of a viable worldwide industrial recovery, particularly in America.
The bank expects gold costs to average $1,550 in the following one month, just about 13% lower from a prior outlook of $1,775 per oz., even though it has reduced its three-month prediction by an even steeper 18 %, from a prior outlook of $1,950 per oz. to $1,600 per oz.
Spot gold prices declined to about $1,650 in early trading today on signals of a slow but definite economic recovery in the states and around the world. Gold futures wavered between small gains and losses Monday with trades seen as wary after latest volatility and before a thin calendar.
Money Managers cut their net long positions, betting gold will go higher, for the second week in a row, according to info released Fri. by the Futures Trading Commission.
Investors “can be seen as partially accountable for the current fall in the cost of gold … What’s more, we might also see a weakening of physical demand,” researchers at Commerzbank wrote in a note to clients.
India last week made a decision to raise import tax on gold for a second time, and the Bombay Bullion Organization has voiced demand concerns for gold in India, who until recently were the world’s largest gold importers until surpassed by
China as the planet’s largest consumers of the metal. The organization expects the increase in gold costs with the higher taxes will see imports plunge thirty five percent this year, as quoted by Commerzbank. By contrast, local gold markets expect the rise in duty to have almost no effect on demand. UBS has reduced its 30day outlook to $1,550 from $1,775 / oz and its 90day outlook to $1,600 / oz from $1,950 / oz.
“In as much as higher U.S. [Treasury] yields reflect a change in sentiment toward expansion, instead of anxiety about sovereign credit or inflation, we think gold consumers will be reluctant,” Tully declared a Gold analyst for UBS.
This was the second increase this year, with the prior increase on just 60 days ago also there was a doubling the tax on silver and gold, with India imposing a levy on imports as a proportion of the price, compared to the prior system of tax by weight.
In his budget speech, Indian Finance Minister Pranab Mukherjee said the increase was necessary due to the states’ ballooning budget deficits.
“I have received advice to reinforce the steps already brought to check this trend,” he said. Gold costs are down more than 7.5 % since hitting a three-month high of $1,790 on Feb 29, 2012.
With the world economy showing evidence of stabilizing, and concerns reducing on a fully-fledged European debt crisis, gold looks to be losing a little bit of its safe harbor appeal and investors are moving to higher risk assets, including stocks.