Market Nuggets: UBS: Investor Sentiment Toward Gold Remains Positive
Friday March 15, 2013 9:12 AM
UBS says its read of the gold market is that positive investor sentiment remains intact but that many are not in a hurry to add to positions.
“Conversations with clients this week confirm our suspicion that although bullish views at the beginning of the year were perhaps too aggressive, underlying positive sentiment remains very much intact,” the bank says.
“Gold has faced many challenges in 2013 thus far, and indeed these highlight that some scaling-back of higher price expectations is warranted. But in spite of disappointment with gold’s price performance, the majority of investors continue to share our constructive view on the yellow metal this year.”
The macroeconomic backdrop remains supportive, the bank says. Medium- to long-term investors overall have been resilient in holding positions, although there has been some lightening in response to poor price performance, UBS says.
“The difficulty for gold right now is that most investors who see higher prices ahead likely already have positions on accordingly; the trials gold has encountered this year has meant that they are in no hurry to add to holdings, for now,” UBS says. “This has made it easier for spec shorts to dominate the market.”
However, this also means potential for a short-covering rally, UBS adds.