NEW YORK (Scrap Register): UBS described the backdrop for gold as favorable but also said that there appears to be no urgency to chase it higher for now.
A recovery from multi-month low prices earlier this month has been underwhelming considering several factors that are in gold's favor: net positioning is extremely light, the dollar is under pressure, rates have eased back from recent highs and U.S. data has been relatively soft of late, said UBS.
The limited interest may be in part due to many market participants being away for summer holidays, the bank added.
While gold investors like gold's diversification attributes, most have been reluctant to get meaningfully involved in the gold market against a backdrop of policy normalization, not only by the Fed but also by the European Central Bank.
This is currently gold's biggest challenge. There are enough supportive factors currently and we think the downside has now likely been contained. But at the same time, there is also a lack of catalysts strong enough to encourage investors to chase gold higher here, UBS added.