Thursday, May 17, 2012

Will Gold Find a Floor? UBS Comments

Things keep getting worse for prices of Gold lately.  The precious metal is currently in one of those “perfect storm” moments where it is unable to flex either its Safe Haven status muscles or catch a break as a commodity. This is being seen as recent news from Greece and the EU of further financial crisis was unable to lift prices of Gold.  In fact, the opposite was true as prices of Gold fell below its 1630 support levels last week and traded side by side lower with the falling Euro.  Similarly, the metal was unable to gain on the weekend news that China reduced its Reserve Requirement Ration by 0.5% to stimulate domestic demand.

The lack of any news triggering demand in Gold has led to prices falling to a low of 1520 on Wednesday, and have now fallen more than $150 from their May highs.

With Gold showing a slight rebound to 1550 today, the question whether we have found a floor in prices or not?  On this question, in UBS’s morning notes on Gold, the investment bank wrote that “Yesterday gold hit our one-month forecast of $1550. But we don't think gold has met its price floor yet. The typical indicators we use as the litmus test to whether prices have troughed aren't suggesting that the worst is past.”

They suggest that without speculator demand in the metal, prices of Gold may not see much interest from “physical” buyers unless it drops below $1500.

In their technical analysis comments, UBS added “Gold's key support at 1522.65, the December low remains intact. Short-term recoveries from here are to unwind the recent
sharp sell-off and upside may be limited as the trend conditions are still bearish. Next support is at 1478.83, the July 1 low. Near-term resistance is at 1564.63, the May 15 high.

No comments:

Post a Comment