The last while stock markets have been moving higher in much of the world as many investors are expecting a global recovery. Europe's sovereign debt situation also is easing over the short run at least.
These factors will be negative as far as the price of gold is concerned according to Swiss-based banking giant UBS. A bank representative said:"We see gold now in a challenging environment and so downgrade our one-month target to $1550 from $1775 and three-month forecast to $1600 from $1950," The representative, Edel Tully, also claimed that the general view of the market is that there could be a sustainable recovery especially in the U.S. and that risks were being reduced.
As signs of increased investor confidence Tully noted that U.S. Treasury yields are increasing. Yields go down as investors flock to these investments when there is high risk in buying stocks but when risk lessens yields go up as investors move back into stocks.
As well some analysts think that interest rates may begin to rise sooner than earlier anticipated. Tully claims also that the European situation may not be as bleak as some have thought.
. About Europe Tully said:"Recent evidence suggests that the outlook for the European economy may actually not be as bleak as initially feared," "Although Q4 GDP growth contracted by 0.3%, leading indicators of late point to a less-severe scenario; those have prompted our economists to upgrade their 2012 full-year forecast to -0.4% from -0.7%." So a year of slightly negative growth creates optimism!
While Tully may be correct. Some analysts think that the market is at its peak or near it and bound for a sharp decline. Any new troubles in such debt ridden countries as Ireland, Spain, Italy, Portugal or Greece might change the mood of investors and lead to a sharp reversal of recent rises in markets. Other factors such as the Iran nuclear crisis or the rise in oil prices could also negatively effect stock prices. For more see this article.