Goldman Sachs Group Inc. raised its forecasts for bullion prices as it scaled back expectations of U.S. Federal Reserve rate hikes over the next year, while remaining bearish on the metal’s prospects.
The bank raised its three, six and 12-month forecasts to $1,200, $1,180, and $1,150 an ounce respectively, from $1,100, $1,050and $1,000, analysts including Jeffrey Currie and Max Layton wrote in a report dated May 10. Gold currently trades around$1,270. The revision was made after Goldman’s economists cut their prediction for U.S. interest rate increases over the next 12months to 50 basis points from 100 basis points.
“While the upside risks to gold pricing appear relatively limited from here, we see a number of catalysts for gold prices to moderate, including a more hawkish Fed and ultimately U.S. policy rate divergence, corresponding with gradual dollar appreciation over the next 3-12 months,” the analysts said. Goldman sees the next rate hike most likely in September but perhaps as early as July.
Gold has surged 20 percent this year and vaulted over $1,300 last week as the outlook weakened for higher borrowing costs in the U.S. on concern about global growth, and as lending rates in Europe and Japan fell below zero. Holdings in bullion-backed exchange traded funds are at their highest since December 2013.
Gold’s rally has prompted some bears, including ABN Amro Group NV’s Georgette Boele, to reverse their outlooks, while BNP Paribas SA said last month that the metal may advance to as much as $1,400 over the next year.
Reference: Bloomberg
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