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UBS warns September rate hike may spark a short-term gold selloff

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Core Development: UBS warns September rate hike may spark a short-term gold selloff
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Investing.com -- UBS warned this week that a Federal Reserve rate hike this month could trigger a short-term drop in gold prices, though it expects any decline to be contained.

Strategist Joni Teves told investors that gold's resilience after the recent employment report does not mean rates no longer matter, but rather that the market has already absorbed a large tightening in expectations.

"We would expect a September hike to generate a knee-jerk correction, but not to derail the broader recovery," she wrote, adding that "a hold would likely deliver a stronger upside response."

If the Fed raises rates, the first move in gold is likely to be lower as real rates and the dollar respond, Teves said, but seasonal physical demand and buying by institutional and official-sector investors at lower prices should limit the fall.

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