NEW YORK (Commodity Online): Zurich based Union Bank of Switzerland (UBS) trimmed its 2012 prices forecast for silver while retained its gold price forecast.

UBS reduced its silver prices forecast for this year to $31.60 an ounce, compared to $33.40/oz previously and retained its gold forecast at $1,680 an ounce.

According to the Zurich bank, the market’s focus in the second quarter was the eurozone debt crisis and a precarious U.S. economy that has prompted a constant reassessment of expectations for more quantitative easing. These are likely to remain the keys, with the potential for a fresh round of easing by the Federal Reserve being the biggest upside risk.

The bank continued that, “We continue to see a recovery in gold prices in H2 versus H1, with Europe’s woes likely to get worse before they get better, and the fragile U.S. economic recovery leaving the door open to stimulus response.”

“We have long felt that the gold market is unprepared for a rally, positioning-wise and sentiment-wise. That means, should the tide turn, the gold price move could be quite sizeable. The significant challenge gold has, however, is convincing investors to buy in; after all, gold has not been the stellar performer of 2012,” UBS concluded.

Gold prices and other precious metals prices have dropped on Tuesday as a stronger US dollar gave traders a bearish outlook on the markets.

The most actively traded gold contract for August delivery on Tuesday fell 0.6 per cent or $9.30, to settle at $1,579.80 per troy ounce on the Comex division of the New York Mercantile Exchange. September silver contract finished at $26.882, down 56.2 US cents.

UBS AG (SIX: UBSN, NYSE: UBS) provides investment banking, asset management, and wealth management services for private, corporate, and institutional clients worldwide, as well as retail clients in Switzerland.