Goldman Sachs: There’s “Growing Downside Risk” to Gold Prices

Interesting commentary here based largely on a forecast of a reversal in real interest rates via Goldman Sachs.  I have to say though, it’s interesting that their “lowered forecast” still implies much higher prices from here:

“Improving US growth outlook offsets further Fed easing
Our economists forecast that the US economic recovery will slow early in 2013 before reaccelerating in the second half. They also expect additional expansion of the Fed’s balance sheet. Near term, the combination of more easing and weaker growth should prove supportive to gold prices. Medium term however, the gold outlook is caught between the opposing forces of more Fed easing and a gradual increase in US real rates on better US economic growth. Our expanded modeling suggests that the improving US growth outlook will outweigh further Fed balance sheet expansion and that the cycle in gold prices will likely turn in 2013. Risks to our growth outlook remain elevated however, especially given the uncertainty around the fiscal cliff, making calling the peak in gold prices a difficult exercise.

Gold cycle likely to turn in 2013; lowering gold price forecasts
We lower our 3-, 6- and 12-mo gold price forecasts to $1,825/toz, $1,805/toz and $1,800/toz and introduce a $1,750/toz 2014 forecast. While we see potential for higher gold prices in early 2013, we see growing downside risks.”

Source: Business Insider

-------------------------------------------------------------------------------------------------------------------

Got a comment or question about this post? Feel free to use the Ask Cullen section or leave a comment in the forum.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

More Posts - Website

Follow Me:
TwitterLinkedIn

Comments

  1. Goldman Sachs leaves me in a quandary.

    On one hand I know they have a long record of outright lying to investors and 3rd parties for their own profit.

    On the other hand I know their public predictions have a woeful track record (more lies or incompetence?).

    I find it simply better to take no notice of anything they say.

  2. growing downside risk on ‘improving US growth outlook’

    while they[AND JPMorgue] layoff employees and mull even more layoffs……and the FED has announced an unended QE program [and will add to it dec 12 with 'twist' ending].

    they are like soros—gold is a bubble[but i'm buying more]…………..watch what they do………not what they say.

    next i am going to hear that debt is irrelevant.

  3. Technically, gold may enter into a primary bear market if the 11/02/2012 lows are violated. However, if such lows are not violated the current primary bull market will be reafirmed. So, technically, we are at crossroads now. A minor pullback will result in flashing a bear market signal, whereas a rally (which breaks above the 10/04/2012 highs) could confirm the primary bull market. More details here:

    http://www.dowtheoryinvestment.com/2012/11/dow-theory-update-for-nov-12-gold-and.html

    Regards

  4. GS says this and tomorrow says that. JPM analysts this and that etc… Who is interested in the forecasting of my uncle ? No one ? Why ? His track record is the same of GS or JPM or any other analyst, that is close to 50% in the short term if the number of forecasted events is high enough and close to zero on the long term. Why ? Because on the short term the possible outcomes are fairly limited, so 50% is normal. On the long term the possible outcomes are going to infinite so forecasting precision is going to zero. But a lot of people listen to GS because they are “expert” and the expert syndrome is a very old bad behaviour of the unwise creature known as homo sapiens.

  5. Goldman may or may not know where Gold is headed. Their comments tell me that they’re short and need to unload to gullible investors and probably go long at a lower price as weak hands are washed out. That’s all. If they were onside with their clients, they wouldn’t be in business they would be a religion.

  6. As Brad Delong put it(summarizing what Krugman and Summers had written previously)…

    “Basically, gold pays no dividends or interest. It is thus expensive to hold in your portfolio when real interest rates are high, and cheap to hold it in your portfolio when real interest rates are low. When interest rates are high, you have to be pretty confident that gold is going to rise in price in order to hold it in your portfolio–which means that when interest rates are high you sell gold unless you think the price of gold is low.”
    http://delong.typepad.com/sdj/2011/09/gibsons-paradox-and-the-gold-boom.html