UBS describes gold’s technical picture as “challenging” at the moment but says it maintains its overall bullish outlook for the longer term.
According to UBS, another price drop after a strong U.S. jobs report Friday suggests the bulk of quantitative easing expectations built into the market after the Jan. 25 FOMC meeting have been remove.
 “Although gold has managed to claw its way back above $1,700, our technical strategist highlights that the overall picture remains challenging…,” bank added.
The Moving Average Convergence Divergence is below zero, which is bearish, and with momentum falling, “stalwart” resistance is expected at $1,712.80 an ounce, the 38% Fibonacci retracement of the February-March selloff, UBS said.
“Emotions are likely running high in the gold community at the moment--a mixture of disappointment, confusion and uncertainty about what is to come,” bank continued.
“But taking a step back from the recent market movements and looking at the broader picture, we think the case for higher gold prices this year remains intact. We maintain our bullish call, while at the same time acknowledging that the journey to fresh highs will neither be straightforward nor smooth,” UBS added.
The biggest risk for gold is if U.S. economic data hold up and prompt the Federal Reserve to consider normalizing policy earlier than 2014, which was the date, UBS concluded.
Source: Commodity Online