Goldman Sachs See Short-Term Strength In Gold, Remains Long-Term Bearish

(Kitco News) - Gold’s strong performance since the start of the year has caused Goldman Sachs to revise its short-term forecast but the bank still remains bearish on the yellow metal in the long-term, according to their latest commodities report.

In its report, the U.S. bank said that they expect prices to average $1,290 an ounce within the first three months of the year. They said that prices will be supported by the recent massive quantitative easing program in Europe and shifting expectations that the Federal Reserve will end up hiking interest rates later in the year.

The analysts said that disappointing manufacturing data, and low inflation will keep interest rates unchanged until at least September.

“Net, absent a reversal in the US and global recovery, we expect only limited further upside to gold prices despite the recent European and Swiss monetary shifts, as these are likely already largely priced in,” the report said. 

Although prices will remain relatively supported during the first quarter of the year, prices should start to fall by the second quarter and the second half of the year. The bank’s 6-month and 12-month forecast are for gold prices to average $1,270 and $1,175 an ounce, respectively.

The bank expects gold prices to end 2015 at $1,190 an ounce and $1,000 an ounce by 2016. Goldman Sachs has lowered their 2016 average gold price to $1,050 from $1,200 an ounce.

“Importantly, while our near-term conviction for lower gold prices has declined, our confidence in lower gold prices for longer has increased on the back of the lower expected inflation in coming years and the deflationary impact on gold’s mining marginal cost of production of lower energy prices, a stronger USD and the shift to the Exploitation phase of commodity supply cycle,” the analysts said.

Courtesy: Kitco News