Gold rebounds after downgrade

Gold is up 0.5% after slipping yesterday on the back of a downgrade by UBS.

Short covering has pushed the precious metal into the black today, and it is now trading at $1250, up $7. Yesterday  gold slid below the $1240 mark after UBS cut its one-month price forecast to $1180 and its three-month forecast to $1100. The investment bank cited poor performance resulting from dollar weakness as the reason for its revision. UBS analysts are concerned that if the Federal Reserve begins to trim its stimulus package, demand for the metal will slip, and this provided additional motivation for the price downgrade.

Gold has lost nearly 25% year-to-date and is heading for its first annual decline in 12 years. Still, as financial markets do not move in straight lines, despite a clear downward trend it would not be unusual to have a rally from time to time.

In October, Chinese imports of gold rose to the highest level since March. Demand is rising ahead of the Chinese new year in January, and as gold prices are relatively low we may see Chinese imports increase as we approach the holiday.

Spot gold chart

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.