(13 November 2019)DAILY MARKET BRIEF 2:Three-month low? Still bullish

Both gold and silver have recently dropped to their three-month lows as US-China trade and Brexit risks retreated, the US stock market set record highs and US government yields rose. This has also made the gold-silver ratio rise to its highest levels since late-August.

Indeed, further weakness cannot be ruled out into the year-end as better risk sentiment takes hold. However, UBS CIO Global Wealth Management believes lower prices should be limited.

"The prospect of a sluggish US economy in 2020, large amounts of bonds in negative territory globally and US election uncertainties should be supportive," according to CIO analysts Dominic Schnider and Wayne Gordon.

They added that additional monetary policy easing by the Fed and broad USD weakness would also favor renewed investor interest in the precious metals.

The analysts expect gold to find support at around USD 1,440/oz, and believe that silver prices can reach USD 19–19.5/oz again.

Silver price levels at or below USD 16/oz should be used to engage either directly or via yield-enhancement strategies, they noted.

CIO expects gold to reach USD 1,600 per ounce in 2020.

By UBS