Goldman Sachs latest gold price forecast cut caused by reversing cycle


The turn in the gold price cycle is accelerating after a 12-year rally as the economy gradually recovers in the U.S., according to Goldman Sachs Group Inc. The investment bank’s analysis are often capable to turn the market.

Goldman just reduced its forecasts for the yellow metal through 2014. The bank cut its three-month target to $1,530 an ounce from $1,615. In addition, it lowered the six- and 12-month predictions to $1,490 and $1,390 from $1,600 and $1,550. In our views, gold has the potential to reach even further lows in the summer months to somewhere between $1200 and $1300 per ounce.

Goldman recommended closing a long Comex gold position initiated on Oct. 11, 2010 for a potential gain of $219 an ounce, according to analysts report.

So far in 2013, gold has dropped 5.3 percent on speculation that the U.S. Federal Reserve may rethink its stimulus amid an economic recovery. The gold price is in bubble territory, Societe Generale SA said in an April 2 report.

Read more: Societe Generale marks the end of gold era with a forecast cut

Assets in the the biggest exchange-traded fund backed by bullion, SPDR Gold Trust, declined to about 1,200 metric tons yesterday, the least since June 2011.

Holding gold as a safe-haven asset is simply no longer a profitable option for investors. The higher inflation that may become a catalyst for the next gold cycle is likely few years ahead and not a concern right now. Other assets such as equities, now offer better opportunities.

Gold for June delivery on the Comex in New York fell 0.2 percent to $1,583.10 an ounce in Asian trading hours. The yellow metal advanced 1.1% in March.

The bank cut its 2013 gold estimate to $1,545 an ounce from $1,610, trimmed its 2014 forecast to $1,350 from $1,490, and set year-end targets of $1,450 in 2013 and $1,270 in 2014. These are far deeper cuts than other investment banks suggested until now.

Read more: Credit Suisse cuts gold price outlook for 2013 038; 2014

However, Goldman recommended starting a short Comex gold position, targeting $1,450 with a stop at $1,650, according to the latest report.

“We believe a sharp rebound in gold prices is unlikely,” the report says. “The fall in prices could end up being faster and larger than our forecast, as aggregate speculative net long positions across Comex futures and gold ETFs remain near record highs.”

Such predictions are no way applicable to silver, as silver is not related to government stimulus and has stronger industrial values.


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