Goldman Sachs (GS) Expects Gold Prices To Fall Sharply Within 12 Months

Gold future prices fell 28% in 2013 and the metal’s prospects for recovery – despite rallying by around 10% since the beginning of the year – don’t look great.

In a new note to clients, Goldman Sachs analysts predict [via Business Insider] that the yellow metal will fall by more than 20% to $1,050/oz within the next 12 months.

Here’s Goldman’s take:

[From BI] “The 2014 gold rally brought prices to their highest level since September before a more hawkish-than-expected March FOMC pushed prices sharply lower. Three distinct and in our view transient catalysts have driven this rally: (1) a sharp slowdown in US economic activity which we believe was weather driven, (2) high Chinese credit concerns, although ultimately bearish for gold demand through lower financing deals if realized, and (3) escalating tensions over Ukraine.

While further escalation in tensions could support gold prices, we expect a sequential acceleration in both US and Chinese activity, and hence for gold prices to decline, although it may take several weeks to lift uncertainty around this acceleration. Importantly, it would require a significant sustained slowdown in US growth for us to revisit our expectation for lower US gold prices over the next two years. Beyond the acceleration in US activity, signs of sequentially weaker Chinese gold imports could pressure prices in coming months.”

Gold futures on the COMEX/NYME settled at $1,327 Monday, their highest level in three weeks. If Goldman’s prediction materializes, it would mark the second largest yearly annual loss for gold futures in more than 30 years.

emphasis added

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