FOCUS – Goldman Sachs neutral on gold price in short term, bearish for next year

London 17/09/2013 – Goldman Sachs has a neutral short-term price outlook for gold prices but the investment bank warns of fresh lows next year.

“Gold prices remain in [a] wide trading range on transient catalysts… such as Syria and the identity of the next Fed chair – with potential for further price volatility ahead driven by the September FOMC and the US debt ceiling debate,” it said in a research note on Tuesday.

Because of these factors and recent US economic data that has disappointed slightly, it is neutral relative to gold for the rest of the year, having a price forecast for the second half of 2013 of $1,300 per ounce.

“We continue to expect that gold prices will resume their decline heading into 2014 when we expect economic data to solidly confirm a reacceleration in US growth and warrant a less accommodative monetary policy stance,” it added.

Its forecast for the end of 2014 remains unchanged at $1,050 per ounce, implying a 20-percent downside risk for prices.

Spot metal prices were last at $1,319/1,319.80 per ounce, up $5.25 on the Monday’s close, having dipped below $1,200 in July before rallying to a peak around $1,420 in August.

Should the US Federal Reserve taper at a greater rate than expected – it is currently seen cutting $10-15 billion from its bond-buying programme of $85 billion per month – gold could decline rapidly given the rebound in speculative positioning since June, Goldman Sachs said.

Beyond this week’s FOMC meeting, it forecasts accelerating US growth late this year followed by a less accommodative monetary policy stance in 2014, exacerbating the bearish outlook for gold.

“With this economic outlook unchanged since we last updated our forecast in June, our gold price forecast is unchanged, leaving us structurally bearish on gold prices into 2014,” it said.

(Editing by Mark Shaw)

Eddie van der Walt

About Eddie van der Walt

London-based, South African-born metals markets reporter, currently focusing on precious metals and the London Metal Exchange. All that glitters must be sold. Twitter: @EvdW