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.