UOB said it was sticking with a negative call on gold, pointing to the rising funding costs to maintain a long position on the yellow metal as the three-month U.S. Libor climbed from 1.7 percent to above 2.0 percent.
“In other words, the funding cost to maintain a long gold position as measured by three-month U.S. Libor has risen by 30 bps (assuming
no additional leverage). Our base case remains three-month U.S. Libor to rise further to 2.4 percent by end of this year,” it said.
“As such, gold price will likely weaken further back below US$1,300/oz towards the US$1,200/oz level,” UOB said.
It said it expected gold to fall to US$1,290 in the second quarter, US$1,260 in the third quarter, US$1,230 in the fourth quarter and US$1,200 by the first quarter of next year.
Gold was trading around US$1,339.98 an ounce in late Asia trade on Friday, according to Bloomberg data.