UBS Gives Gold A Thumbs Down, Asks Investors To Square Off Their Positions In The Yellow Metal

After UBS Group AG, a Swiss multinational investment bank and financial services entity warned investors in bullion, to rethink their bullion strategy and holdings, gold slipped on Monday (August 16, 2021) after ending the previous week on a strong note. This is as the firm expects global economic recovery and gains in the dollar going ahead into the next year to weigh on the bullion.

Earlier strong non-farm payrolls data released in the US raised bets of an earlier Fed tapering and consequent policy rate hike, which in turned dampened the appeal of the shiny metal. Consequently, gold prices in the international market crashed by a sharp quantum to below its critical level of $1800 per ounce. Nevertheless over the last week, the bullion made a decent recovery. Notably going ahead in the week, US retail sales data is due on Tuesday. Also, investors will analyze Fed Chair Jerome Powell's speech and minutes of the last Fed meet for more clarity on the likely Fed tapering timeline.

"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."

Divided view on Price forecast for gold and silver

Gold and silver price forecast by UBS

In an exclusive TV interview with Bloomberg Schnider said, "Prices could drop closer to $1,600 an ounce, while silver may fall to $22 an ounce or lower". Nevertheless for investment in precious metals, platinum could turn out to be a better bet owing to its higher industrial exposure, Schnider added.

Goldman Sachs price forecast for gold and silver

Another multinational investment bank entity, Goldman Sachs is rather positive on precious metals and sees gold touching levels of $2000 per ounce towards the end of 2021 on increased demand in the retail market as well as shoot-up in purchase of the yellow metal by global central banks. Also, for silver, the organisation maintains its price target of $30 per ounce, said analysts including Sabine Schels and Daniel Sharp over an email.

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