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General Precious Metals
Goldman Sachs sees $1,800 gold prices with potential for $2,000
(Kitco News) - Goldman Sachs looks for gold to hit $1,800 an ounce in the next year, with the potential for $2,000 if inflation should accelerate more than expected.
Goldman said it anticipates the metal will eventually make another leg higher in a scenario that resembles a pause followed by gains during the 2008-09 financial crisis.
Gold has been mostly range-bound for the last two months after initially falling this spring when investors were selling assets across the board to raise cash when stocks collapsed due to the COVID-19 pandemic. However, gold then bounced back when governments and central banks launched massive stimulus programs.
The metal eventually turned sideways when so-called risk assets bounced, but with gold holding up due to U.S. dollar weakness and low long-term real interest rates, Goldman said in a report Tuesday.
“The situation resembles the first half of 2009 when despite continued economic recovery and higher stock prices, gold and real rates remained range bounded as the Fed maintained ultra-easy monetary policy,” Goldman said. “Eventually gold broke out higher in Q3 2009 in line with the move lower in real rates as inflation expectations increased outpacing [a] rise in nominal rates. We believe that a similar dynamic can play out today with the repricing of inflation expectations being the catalyst for a move up in gold.”
Gold also may be underpinned as emerging-market economies reopen, Goldman continued. Analysts said the gold premium in China has already returned to pre-crisis levels, suggesting normalizing demand.
“All in all, we believe that gold should withstand the near-term cyclical rotation expected by our strategist and continue to expect it to reach $1,800/toz on a 12m [12-month] basis,” Goldman said.