Goldman Trims Gold Forecast But Sees Prices Rising
(Kitco News) - Goldman Sachs looks for gold prices to be at $1,250 a troy ounce in three months and $1,325 a year from now,the investment bank said in a research report late Thursday.
The updated three-, six- and12-month forecasts average around $100 lower compared to the bank’s previousoutlook as the gold market has been in a sharp downtrend since mid-April,although sideways in recent weeks.
Goldman described the recentinvestment environment as similar to the late 1990s, when a boom in technologystocks meant no fear in so-called risk markets in developed nations, whilethere was a financial crisis in emerging-market countries. Softeningemerging-market economic growth and the strong U.S. dollar simultaneously hurthousehold savings in EM nations, a key metric for gold demand.
As gold prices fell, there was asignificant decline in exchange-traded-fund demand in developed nations, whichGoldman estimated was responsible for around $60 per ounce of the drop in goldprices since April. Softer physical gold demand, driven primarily byemerging-market nations, accounted for about $80 of the decline, the bankcontinued.
“There are already signs thatgold fundamentals are starting to change with the dollar weakening over thepast week, Chinese and Indian gold purchases rebounding, and Turkish CB[central-bank] holdings stabilizing,” Goldman said. “From here, we continue toexpect gradually higher gold prices on the back of renewed EM demand. However,against this, we are already seeing a later-cycle U.S. economy with higherinterest rates increasing the contango (negative carry) in gold.
“On net, while we continue to seea gradually higher price path for gold, we now forecast gold at $1,250/toz,$1,300/toz and $1,325/toz over the next three, six and 12 months (previously$1,350/toz, $1,375/toz and $1,450/toz).”
By Allen SykoraFor Kitco News
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