Goldman Sachs Monday cut its outlook on gold prices for this year and
next, citing growing price risks from a brightening U.S. economic
picture.
The bank now expects gold to end this year at $1,300 a
troy ounce, down 9.4% on its previous forecast. It sees gold ending 2014
at $1,050 an ounce, down 17.3% on its earlier outlook.
"Medium
term, we expect that gold prices will decline further given our U.S.
economists' forecast for improving economic activity and a less
accommodative monetary policy stance," the bank said. "Further, with
quantitative easing tapering likely to start soon, perhaps even a bit
sooner than previously anticipated, we are fast forwarding on our real
rate path."
Gold is traditionally viewed as a safe store of value
at times of weakness in the wider market, and is sought as a hedge
against inflation and currency debasement at times of loose central bank
monetary policy. The price of gold plunged 6.3% in a single session
last week after U.S. Federal Reserve Chairman Ben Bernanke said the U.S.
central bank could start winding down its $85-billion-a-month
bond-buying program later this year. He also said the bank could even
cease the purchases next year if growth picks up, as the Fed projects,
unemployment comes down and inflation moves closer to the central bank's
2% target. The Fed's bond-buying program has been a major support to
gold prices in recent years.
Purchases of gold by central banks, meanwhile, "will not be sufficient to offset this decline in prices," said Goldman Sachs.
Central
banks in emerging-market countries have increased their gold holdings
over the past few years in reaction to the sovereign-debt crises
affecting reserve currencies like the U.S. dollar and the euro. This has
helped shore up gold prices by absorbing supply.
Lower gold
prices should prompt producers to scale back production of the metal,
however, and prices should therefore find longer-term support at the
$1,200 an ounce level, said the bank.
Source by Commodity Insights
No comments:
Post a Comment