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Goldman Sachs cuts gold forecast

TradingPub Admin | April 11, 2013

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Major financial services firm Goldman Sachs recently released a report lowering its predictions for gold in the short term and long term, responding to recent sharp declines in the price of the precious metal and a changing market, according to the Wall Street Journal blog MarketBeat. 

Gold forecasts
The major financial services firm announced in the report that it has lowered its three-month target for the price of gold to $1,530 per ounce, which is a reduction from its previous estimate of $1,615 an ounce, according to Bloomberg. This forward prediction was not the only one that was cut, as Goldman Sachs lowered its six-month estimate to $1,490 from $1,600 and its 12-month forecast to $1,390 from $1,550. 

The major financial services firm already announced that it has become less confident in the future price of the precious metal in a report that was released approximately six weeks ago, at which point it predicted that the commodity would average $1,600 in 2013 after previously projecting a price of $1,810 for the year, according to The Wall Street Journal blog MarketBeat. 

Changing economy
At the time, Goldman Sachs attributed its lowered price forecast to a modest improvement in U.S. economic growth and an environment of rising interest rates, the media outlet reports. The report noted the sharp drop in value that the precious metal has incurred in the recent past could be followed by much stronger depreciation. 

"The decline in prices since last fall and our updated forecast suggests that the turn in the gold price cycle is likely already underway," Goldman wrote, according to the news source. "As a result, although our U.S. economic forecasts point to modest near-term upside to gold prices, we believe that a sharp recovery in prices to our previous price forecast is unlikely." 

Investor sentiment
One factor noted by the Goldman Sachs report was that gold has frequently been a favorite of investors during times of economic turmoil, but that this occurrence has not been supported by recent events, according to MarketBeat. Market participants have not pushed the price of gold higher over the last month as investor sentiment has been impacted by concerns about fiscal turmoil in Cyprus and lackluster economic data. 

"Despite resurgence in euro area risk aversion and disappointing US economic data, gold prices are unchanged over the past month, highlighting how conviction in holding gold is quickly waning," the Goldman analysts wrote, the media outlet reports. "With our economists expecting few ramifications from Cyprus and that the recent US slowdown will not derail the faster recovery they forecast in 2H13, we believe a sharp rebound in gold prices is unlikely." 

Mounting speculation
A litany of market experts have rushed to lower their gold forecasts recently, according to Bloomberg. BNP Paribas, Barclays Plc, Danske Bank A/S, Credit Suisse and Societe Generale have all predicted that the price of the metal will end up lower next year.

Gold prices have fallen 5.8 percent in 2013, the media outlet reports. Nonetheless, French lending institution Societe Generale wrote in a recent report that these prices are still high and their elevated level could represent a bubble. Major German financial services firm Deutsche Bank AG recently pointed to a lack of safe-haven demand and a rising price for the dollar when lowering its 2013 price forecast for the metal by 12 percent. 

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