After months of predicting Armageddon for gold, Goldman Sachs has softened its stance a little and raised its price target on the precious metal.
The heavyweight US broker still does not like the metal much even so.
“The risk-off environment that contributed to gold’s outperformance at the beginning of this year is less likely to repeat in the near future,” said the report.
But after a 20% rise since December and busting through the broker’s short position stop-loss, some reassessment was on the cards.
The New York-based bank says it now expects gold to trade at $1,200 per ounce in three months (up from its previous forecast of $1,100), $1,180 in six months ($1,050), and then $1,150 in 12 months’ time ($1,000).
Even with these tweaks and given that gold is currently trading around $1,270, Goldman’s outlook is quite bearish.
The report’s authors, commodities research heads Jeffrey Currie and Max Layton, cite the renewed confidence in Chinese growth, a stabilising Yuan and the improving oil price as reasons why they think gold prices are set to moderate over the coming year.
The weak US dollar has also contributed to the current gold prices, although Currie and Layton expect a “hawkish” Fed to raise interest rates later in the year.
“We still see the economy on a path that will prompt the FOMC to restart the normalisation process before too long – most likely in September but perhaps as July”, the report says.
Should the Federal Reserve go ahead and increase interest rates as Goldman’s pair predict, the US dollar will become stronger and will likely weigh down gold, as the metal and US currency traditionally move in opposite directions.
Gold is up 20% since the start of the year and enjoyed its best quarter for 30 years in March.
A couple of hours in to US trading, spot gold was up $11 to $1,276 per ounce, silver had risen slightly by $0.359 to $17.462 per ounce, while platinum was also up by $17 to $1,067 per ounce.