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Goldman Trims Gold Forecast But Sees Prices Rising

Kitco News

(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- and 12-month forecasts average around $100 lower compared to the bank’s previous outlook as the gold market has been in a sharp downtrend since mid-April, although sideways in recent weeks.

Goldman described the recent investment environment as similar to the late 1990s, when a boom in technology stocks meant no fear in so-called risk markets in developed nations, while there was a financial crisis in emerging-market countries. Softening emerging-market economic growth and the strong U.S. dollar simultaneously hurt household savings in EM nations, a key metric for gold demand.

As gold prices fell, there was a significant decline in exchange-traded-fund demand in developed nations, which Goldman estimated was responsible for around $60 per ounce of the drop in gold prices since April. Softer physical gold demand, driven primarily by emerging-market nations, accounted for about $80 of the decline, the bank continued.

“There are already signs that gold fundamentals are starting to change with the dollar weakening over the past week, Chinese and Indian gold purchases rebounding, and Turkish CB [central-bank] holdings stabilizing,” Goldman said. “From here, we continue to expect 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 higher interest rates increasing the contango (negative carry) in gold.

“On net, while we continue to see a 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).”

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 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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