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Goldman Reiterates $1,050/Oz Gold Call, Sees Potential For PGM Supply Disruptions

By Kitco News
Monday April 14, 2014 9:10 AM

(Kitco News) - Goldman Sachs reiterated its call for gold to decline this year as U.S. economic growth picks up and Treasury yields rise, but the bank listed potential for supply disruptions in platinum, palladium and nickel.

As they did on March 20, bank analysts listed a year-end gold forecast of $1,050 an ounce.

Gold has a stronger tone so far this year, and a Sunday report from Goldman attributed this to “poor, but likely weather-driven” U.S. macroeconomic data so far this year as well as geopolitical tensions surrounding Ukraine.

“As our economists are still confident in an acceleration in U.S. economic growth during the second half of this year, we continue to stand by our year-end gold price target of $1,050/toz,” Goldman said. “More broadly, we believe that with tapering of the Fed’s QE (quantitative easing), U.S. economic releases are back to being a key driving forcebehind gold prices. As a result, we expect that the decline in gold prices will likely be data dependent, in contrast to our 2013 bearish gold view which was driven by the disconnect between stretched long gold speculative positioning and stabilizing growth.”

Among other metals, Goldman said certain Russian metals – such as higher-value-added steel, copper and aluminum – could be under the threat of sanctions from Western nations. Exports of these commodities are “non-trivial” at $19 billion, or 1% of Russia’s gross domestic product, while sanctions on these would likely have a “relatively minimal impact” on European and U.S. economic growth, considering Russia’s modest share of global output and high global inventory levels, Goldman said.

Meanwhile, Goldman suggested Russian exports of other metals such as platinum, palladium and nickel may be less likely to face Western sanctions since they may be difficult to replace in European and U.S. markets given their large shares of global output. However, this in turn could mean these metals become potential targets of Russian “counter sanctions,” Goldman said.

“Palladium, in particular, is a crucial and not substitutable input into the global car industry,” Goldman said.

The bank’s report did not list forecasts for the platinum group metals but did for nickel, which is also drawing support from an Indonesian ore export ban. Prices could rise to $18,000 to $20,000 a ton if Indonesia should not back down from the ban quickly following July presidential elections, the bank said. Three-month metal was at $17,495 as of 8:41 a.m. EDT.

However, Goldman’s 12-month forecast is $16,000 a ton, with the bank saying an Indonesia ore ban will not be sustainable in the long run, with China likely to aggressively build out blast-furnace nickel pig iron capacity over the next two years.

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Goldman’s other 12-month forecasts for metals included aluminum, $1,750 a metric ton; copper, $6,200 a ton; zinc, $2,100 a ton; lead $2,300 a ton; and silver, $17.50 an ounce.

Overall for commodities as an asset class, Goldman said it maintained a near-term neutral recommendation with a minus 2% three-month return and an underweight recommendation on a 12-month basis with a minus 4% return.

By Allen Sykora of Kitco News; asykora@kitco.com


Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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