Goldman Sees 'Balanced' Gold Market At $1,250 In Six, 12 Months
(Kitco News) - Goldman Sachs has a “balanced” outlook on gold, looking for the metal to be around $1,250 an ounce six months and a year from now.
The investment bank’s forecast is relatively in line with current prices, with Comex August gold futures hovering just above a six-week low from earlier this week, last trading at $1,243.70 an ounce. The gold market has seen significant selling pressure recently after it hit a seven-week high of $1,298.80 an ounce June 6. Goldman blames the price retreat since on higher U.S. real rates, driven by more hawkish-than-expected Federal Reserve commentary.
“We have a balanced gold outlook, with our 6/12 month forecasts at $1250/oz,” Goldman said in a commodities outlook released Thursday. “On the one hand, we expect higher U.S. real rates and Fed balance-sheet reduction to put downward pressure on gold.”
However, analysts said they look for this to be offset by three other gold-supportive developments. For starters, U.S. economic growth is expected to moderate. The bank’s economists also expect economic growth – meaning more gold-purchasing power -- in emerging-market nations that tend to be gold buyers, such as India, China, Turkey and Indonesia. Also, Goldman said it expects gold supply to peak in 2017 and then decline over the next several years, thereby improving the attractiveness of the metal to investors.
“Gold net speculative positions are substantially lower than they were during 2016 but remain above their historical average, while gold ETFs [exchange-traded funds] have continued their gradual upward trend, albeit not at the same pace as in 2016,” Goldman said.
The bank listed six- and 12-month silver forecasts of $17.20. Around mid-morning, Comex July silver was at $16.575.
Meanwhile, Goldman analysts said they look for platinum to come under pressure, citing a peak in the auto market and downward trend in diesel-related demand. The main industrial use of the metal is auto catalysts. A wild card, said Goldman, will be the South African rand. Moves in the currency impact the profitability (and thus amount of output) of miners in the world’s main platinum-producing nation, which are paid in dollars but pay their operating expenses in rand.
Barring major moves in the rand, Goldman listed six- and 12-month platinum forecasts of $900 an ounce. Nymex July platinum was trading at $912.80 as of mid-morning.
Analysts also look for palladium to retreat after a strong rally so far in 2017, which was helped by a projected supply deficit. However, the U.S. demand outlook is weaker and there is heavy bullish positioning in the futures market, meaning selling potential when these speculators eventually exit. As a result, Goldman looks for palladium to fall back to $750 in six months and $725 in 12 months, down from the Nymex September palladium price of $851.40 around mid-morning.
“Although in the very near term palladium could briefly price above platinum, we expect this to be short-lived as it would incentivize substitution of palladium for platinum in auto catalysts and holders of physical palladium stocks to sell their metal,” Goldman said.