UBS trims price forecasts as gold extends losses

UBS cut its one and three month forecasts for gold prices because of sales of exchange-traded funds linked to the metal and the outlook for the US dollar.

Gold will trade at $850 an ounce in one month and $800 in three months, compared with a previous forecast of $900 and $850 respectively, UBS said in an e-mailed report. The bank last cut its forecast April 23.

Gold for immediate delivery was trading at $873.25 as of 8.52am in London.

Gold extended losses on Wednesday, hovering near a three-month low hit the previous day, after the dollar surged against the euro, prompting investors to liquidate some of their holdings. Investors await the outcome of a meeting by the US Federal Reserve amid expectations it is ready to signal a pause in its rate cutting, which in theory will support the dollar, but reduce gold's appeal as an alternative investment.

Gold fell to $872.55/873.25 an ounce from $873.55/874.75 an ounce in New York on Tuesday, when it tumbled to $868.20, its lowest since late January, on a combination of a rise in the dollar and a fall in oil.

"We're probably looking at a range of $868 as the next support, with that resistance now at the $875 level," said Darren Heathcote of Investec Australia. (Agencies)

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