Photo: Mamta Badkar
Very interesting call from UBS’ Brian MacArthur…The firm’s gold target for 2012 has been lowered from $2050 to $1679/oz.
It’s basically a bet on deflation or disinflation around the world… liquidity being sucked out of economies, with less cash to go into gold.
UBS believes that capital flows are accelerating out of emerging markets and that tighter liquidity is hurting commodity demand. Furthermore, China has not been stimulating private construction, lowering commodity intensity. Coupled with the risk of a cyclical slowdown in the US that may trigger renewed credit stress, UBS has reduced its near-term commodity outlook. UBS’ 2012 gold forecast has been materially lowered to $1,679/oz from $2,050/oz, while it has materially increased its 2014 silver price to $25/oz from $20/oz.
People like to talk about gold responding to the Fed or the national debt, or whatnot.
But the most compelling driver of the price of gold is consumers in emerging markets getting richer and richer, and buying more of it.
If that driver dissipates, it’s hard to stay as bullish.
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