Gold to hit $1,700/oz this month: UBS

NEW YORK (Scrap Monster): A greater chance for monetary stimulus from the Federal Reserve should support gold prices, with the yellow metal seen rising to $1,700 an ounce in 30 days, said Union Bank of Switzerland (UBS) in a commodity briefing.

UBS also raised its one month gold forecast to $1,700 an ounce from $1,550/oz and its three-month forecast to $1,750 an ounce from $1,600.

Edel Tully, precious metals strategist at UBS stated that, “our one-month target coincides with the Fed’s Jackson Hole symposium at the end of August, which we think will be significant for policy expectations ahead of the September FOMC meeting.”

According to the Zurich based bank, investors are interested in buying gold but they are awaiting some signal from the Federal Reserve on the outlook for monetary policy.

There is low speculative involvement, judging by the Commodity Futures Trading Commission’s data, which means there is room for more of this buying to enter. Further, technical charts favor a rally, and a move above the $1,631.60 could mean a rally back towards $1,700, she added.

The three month view takes into account action by the Fed and possible uncertainty surrounding the U.S. November presidential elections and “the looming US fiscal cliff” where potential tax hikes and spending cuts occur.

Tully also noted that, seasonal factors also support a rally in gold as the next three months are typically the strongest months for the metal.

“There is no guarantee that historical patterns play out, but this could well become a factor this year, particularly given the macro-economic events lined up ahead,” UBS concluded.