Gold could have further to go on the downside as physical buying is still lacking, according to a research note published by Swiss bank UBS Wednesday.
"Gold reached our one-month forecast of $1,280 this week. Despite its $100 decline from the year's high, gold hasn't found a host of willing buyers looking to pick up cheaper metal," wrote analyst Edel Tully.
"For sure, some buying interest has emerged on the lows, but further downside has been prevented largely because sellers are in short supply."
The analyst noted that physical demand remains lackluster "across a host of regions and this is an important signal -- gold needs that physical indicator to pick up in order to give the market some confidence that a floor is nearby."
On March 14 gold fixed in London in the afternoon at $1,385/oz, the highest fix of 2014 so far.
Gold opened 2014 with a morning fix of $1,219.75/oz, while on Tuesday it fixed in the afternoon at $1,283.75/oz.
"After such a sizeable washout, we're not looking for another material price drop. But we understand the market's hesitancy to befriend gold once again...With expectations largely universal that gold will be rangebound this year, there is little urgency to be short or long gold. Simply, participants are in no rush," said Tully.
