UBS: Gold closely tracking changes in Fed policy expectations

UBS says that gold has been closely tracking changes in Fed policy expectations of late, and they expect this to continue.

"The link is likely going to become more acute in the next two weeks as the September FOMC meeting draws near. Ahead this week, the focus will likely be on August nonfarm payrolls," UBS projects.

"Gold's pause around the 100-day moving average last week reflects the underlying view that, timing aside, the Fed will eventually have to raise rates at some point and this is likely to create some challenges for gold. In addition to Fed policy expectations, market positioning has also been an important factor for gold price action of late," UBS argues.

"Extreme short positioning in gold from late July through to early August helped make the market more vulnerable to upside risks, aiding the recovery towards the recent high around $1170 when expectations for a September Fed rate hike eased," UBS adds.

Thanks to UBS and to the folks over at eFX for posting it. For trade recommendations from banks and more, check out eFX Plus