Gold slipped after finishing strongly last week, with UBS Group AG warning investors to rethink their bullion holdings as the global economy recovers and the greenback strengthens into next year.
Bullion had been clawing back some ground over the past week after better-than-expected U.S. jobs data sent prices tumbling on bets the Federal Reserve may start paring back massive monetary stimulus soon. This week, investors will parse through a speech by Chair Jerome Powell, as well as minutes of the Fed’s latest meeting, for more clues about the likely timeline for tapering. Figures for U.S. retail sales are due Tuesday.
“The message must be: if you have a tactical position, get out; if you have a strategic position, hedge it,” said Dominic Schnider, head of commodities and Asia Pacific foreign exchange at UBS Global Wealth Management CIO Office. “In a world that looks better, why would you want to hold so much insurance asset, and that simply means the market needs to balance at the lower level.”
Prices could drop closer to $1,600 an ounce, while silver may fall to $22 an ounce or lower, Schnider said in a Bloomberg TV interview on Monday. Platinum may be a better investment in the precious metals space due to its greater industrial exposure, he added.
Others are more optimistic, with Goldman Sachs forecasting that prices will hit $2,000 toward the end of the year as consumer and central-bank purchasing pick up. It’s also sticking with a $30-an-ounce price target for silver, analysts including Sabine Schels and Daniel Sharp said in an emailed note.
Traders will likely focus on the retail sales numbers to gauge the strength of the country’s recovery, said John Feeney, business development manager at Sydney-based bullion dealer Guardian Gold Australia. “Gold has also now recovered above the level of last Monday’s open, before the flash crash event, so we expect the low of Aug. 9 to be a significant medium-term bottom.”
Spot gold traded 0.2% lower at $1,775.46 at 10:34 a.m. in London, after rising 1.5% on Friday. The Bloomberg Dollar Spot Index held steady, after a 0.5% drop in the previous session. Silver, platinum and palladium all declined.
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