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A correction in equity markets due to shifting economic growth expectations could be the catalyst to push gold out of its narrow range, according to one market strategist.
In a recent report, Joni Teves, precious metals strategist at UBS, said that although gold is currently stuck in no man's land, there is potential for prices to push to $1,600 an ounce. The question is, for how long can prices hold that level?
"It is not so much a question of who is buying gold, but also who is selling it," she said in the report. "While many are not yet keen to chase it here, there is also no appetite to sell short or even let go of strategic positions that have been built. Sentiment is friendly and there is an underlying bias to be long."
Currently, the biggest threat to the global economy remains the spreading novel coronavirus. The virus has infected 71,000 people globally, with most of the cases still in China. More than 1,700 people have died from the virus.
The full impact the virus will have on global growth is still unknown, but Teves said that UBS economists expect that any global economic weakness will be confined to the first quarter. She added that soft economic growth will be positive for gold in the short-term, but the yellow metal might not be able to hold $1,600 in the long-term.