In a Precious Metals Note published Monday, UBS Investment Research lowered its 2014 average gold price from $1325/oz to $1,200/oz.
“The struggle for gold not only rests with the predominant selling interest amongst investors currently, but with limited positive catalysts looking forward; gold is unlikely to regain its former appeal,” said UBS Analyst Joni Teves and Strategist Edel Tully.
UBS also lowered its average price expectations for silver from $25 previously to $20.50/oz for 2014 and from $24 to $21 in 2015.
“The more upbeat outlook on the global economy, the reduction of tail risks, and the growing appetite to take on more risk suggests that safe havens like gold will become even more unfashionable up ahead,” said UBS. “The yellow metal’s performance this year highlights the extent to which gold has lost its allure and implies that it will take a very substantial change in the macro picture for this to be reversed.”
“As 2013 comes to a close, the New Year will likely tempt investors to further move out of safe havens—and especially out of gold—into other assets. Gold has become old news, and investors are likely to be eagerly searching for new places to put their cash to work,” said the analysts.
However, they added, “Those who hold gold for diversification purposes and as a hedge against tail risks are likely to continue holding some part of their portfolio in gold—despite the yellow metal’s recent poor performance, this argument remains intact.”
“But the reality is that the ownership of gold has increased a lot over the last several years and given the current macro backdrop, this suggests that there is a lot of room to reduce holdings and invest the money elsewhere,” they advised.
“Our expectation for weaker prices by no means suggests a straight path south,” UBS cautioned. “The $1200 average forecast reflects the view that the gold market will fluctuate widely as it faces the crosscurrents of an improving macro backdrop, the changing landscape of physical demand and, ultimately, the implications on mine production.”
iPad Version: Picture – Gold and silver bars are pictured at the Austrian Gold and Silver Separating Plant ‘Oegussa’ in Vienna: Lisi Niesner / Reuters