Gold price touches post-Trump high, then rally fizzles

Gold bulls and safe haven buyers made the most of a disappointing jobs number in the US, worries about the fallout from US bombing in Syria and the latest terrorist attack in Europe to push gold 1.6% higher early on Friday.

Gold for delivery in June, the most active contract on the Comex market in New York with more than 36m ounces traded (a third higher than the usual daily average volumes) touched $1,273 an ounce, the highest since November 11 last year, shortly after the open.

But by the end of regular dealings had given up almost all of its gains to trade at $1,256.10 bringing its year-to-date gains to 9.1%.

Gold remains under-owned and macro conditions should continue to encourage broader participation

In a research note quoted in MarketWatch UBS strategists Joni Teves and Roque Montero cut their forecasts for the average gold price in 2017 by $50 to $1,300. The investment bank's outlook for 2018 is even bleaker and now believes gold will average $1,325 next year. That's down from $1,450:

“Firstly, the pickup in gold interest in Q1 was slower than we expected,” the UBS team says. “Secondly, a faster pace of Fed tightening than previously expected presents downside risks for gold, although more from the impact on sentiment than how we expect Fed policy to ultimately affect rates.”

Europe could produce some downside price risks, especially as the political clouds clear and economic data gets better. That in turn could push up the pressure on global bond yields, providing a better alternative to gold, said the strategists.

Still, they toss a bone to gold bugs: “Gold allocation remains valid amid moderate rates, modest growth acceleration and macro uncertainty … Gold remains under-owned and macro conditions should continue to encourage broader participation,” say Teves and Montero.