1 Precious metals Preference: neutral : Gold (25 Jun); USD 1,573/0z (last month: USD 1,573/0z) Recommendations UBS View (gold) 6-month target: USD 1,650/oz Tactical (up to 6 months) * The price outlook for gold is largely tied to quantitative easing by the Fed. Although the probability has ° Incase ofa conversion into gold, investors increased on weak US data, our base case still calls for no QE. Hence, current prices run on thin ice, in our should hold me position and carget - view. In the absence of any monetary stimulus, the gold market is likely to be oversupplied by more than conversion jt ine original Strike level. Over 400 tons this year three months, we regard strike levels ; around USD 1,460-1,520/oz as attractive. e Physical demand out of Asia remains lackluster. With the USDINR trading at a record high, the world's With option volatility on the rise, the risk second-largest gold market, India, is likely to witness a steep decline in jewelry consumption and a rather reward for selling volatility has improved. firm increase in scrap supply. Central bank buying, estimated at 300 tons (7% of total demand) in 2012, . will not be enough to clear the market. Right incentives — i.e. temporary price setbacks — are needed to hogs is - ri els zation in th motivate enough demand, before prices should manage to rebound towards USD 1,650/oz in 6 months. ° ‘ e€ ie s av oe moter int e ¢ The negative stance from a absolute return perspective, should not overshadow the relative growth in china and indi ‘he owas largest attractiveness of the yellow metal. The higher probability of QE3 by the Fed poses an upside risk to the gold markets, should ensure a steady rise gold price. Hence, we maintain our neutral position. in demand for gold and platinum over time. Physically backed ETF positions allow 4 Positive scenario 6-month target: USD 1,920/oz investors to participate effectively in * Additional quantitative easing measures by the US Fed and the ECB are implemented, or infl