LONDON, July 14 Investment bank UBS UBSN.VX
said on Monday it has raised its short-term gold price forecasts
because financial market turmoil has boosted the appeal of gold
as a safe haven for investment.
The bank said it sees the average gold price at $1,000 an
ounce over the next month, against a previous forecast for $900,
and at $1,050 an ounce over the next three months, versus its
former estimate of $850.
UBS said strong buying on Friday as panic swept financial
markets due to fears about the health of U.S. mortgage finance
companies Fannie Mae FNM.N and Freddie Mac FRE.N showed the
strength of investor interest in gold.
Gold rallied to a four-month high of $967.60 an ounce as the
equity markets wilted and the dollar slid. Gold holdings of the
world's largest gold-backed exchange traded fund, SPDR Gold
Trust (GLD.P), rose to a record 705.90 tonnes.
"We believe that in the near term gold will be driven by
risk aversion fears," said UBS head of metals strategy John
"Following the weekend moves to reassure financial markets
about the future of Freddie and Fannie, there may be some
respite to these fears. But this may be only short-lived."
"We believe that the moves in ETF holdings is evidence that
investors have become much more worried about systemic risk and
that, once worried, investors will remain concerned until there
is clear evidence that the situation is getting better."
"To that end we upgrade our short-term gold price forecasts
... but we note that if sustained, heavy inflows into the ETF
occur, the move in gold could become self-fulfilling and much
higher numbers could result."
(Reporting by Jan Harvey; Editing by Peter Blackburn)