March 23 (Reuters) - Goldman Sachs on Thursday raised
its gold price forecasts, describing it as the best hedge
against financial risks, and reiterated its bullish view on
commodities as a banking crisis has yet to spill over into
physical markets.
It hiked its 12-month gold price target to $2,050 an ounce
from $1,950, joining others such as Citi, ANZ and Commerzbank in
raising forecasts.
"We believe the market will be well supported not only by
ETF (exchange traded fund) inflows once Fed fund rates have
peaked but by a stronger 'Wealth' effect from the East as the
USD depreciates into year-end on yield compression and EM GDP
grows strongly on China reopening effects," the bank said in a
note. Gold broke above $2,000 on Monday on safe-haven
demand triggered by the banking crisis before easing following
the rescue of Credit Suisse. The zero-yield asset's prices jumped as much as 2% on
Wednesday after the U.S. Federal Reserve indicated an end to
rate hikes was on the horizon.
Gold would slowly grind higher on central bank buying and
geopolitical concerns, despite shorter-term risks such as a
likely slowdown in Chinese physical buying, but a break above
$2,100 would require the Fed to initiate actual rate cuts, which
was not its view, Goldman said. Goldman also said it was confident in its commodity
'supercycle thesis', with supply constraints becoming pronounced
later this year, prompting another rise in prices, adding it
favored metals over oil near term.
"Chinese demand continues to surge across the commodity
complex, with oil demand already topping 16 million
barrels-per-day," the bank said, forecasting Brent to
reach $97 a barrel in the second quarter of 2024.
The recent pullback in oil was due to financial risks rather
than fundamental supply-demand factors and oil was currently
"oversold", it said. (Reporting by Arpan Varghese in Bengaluru
Editing by Mark Potter)
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