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Goldman Sachs Sees Gold Prices At $1,450 By Next Year

Renewed growth in emerging markets (EM) will help drive gold prices higher, according to commodity analysts from Goldman Sachs, who have significantly increased their forecast for the yellow metal.

In a report Thursday, the global investment bank said that in three months, it see gold prices pushing to $1,350 an ounce, in six month rallying to $1,375, and by next year it sees gold prices at $1,450 an ounce. The revisions are up from the bank’s previous forecasts of $1,225, $1,200 and $1,225, respectively.

The analysts noted that as a result of emerging-market gold demand, the precious metal has been able to withstand rising bond yields.

“The ‘normal’ relationship would say that gold has to go lower as real rates rise, since as a non-yielding asset there is less reason to hold gold in a higher rate environment. However, as EM growth has recovered, so has their gold demand, leading to an upward level-shift in the equilibrium gold price,” the analysts said in the report.

“While stronger EM growth has clearly been the key driver, we also now see upward pressure on gold from: stronger EM FX (vs. a weaker USD); higher inflation breakevens thanks to higher oil, which have been offsetting much of the recent increases in nominal rates; and some potential for hedging demand in a choppy market environment.”

Goldman’s comments come as gold prices have pushed off a five-week low hit overnight as the market tested key support just above $1,300 an ounce. Comex April gold futures last traded at $1,316.60 an ounce, up 0.15% on the day.

The analysts noted that it is not uncommon for the gold market to underperform other risk assets as investors continue deal with volatile equity markets. At the start of the week, the Dow Jones Industrial Average dropped 1,600 points intraday, it biggest point decline in history.

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MARKET SUMMARY

INDICES

Name Last Change
DOW 25270.10 0.75%
S&P 500 2720.78 0.71%
NASDAQ 7260.14 1.70%
TSX 15131.60 0.01%
TSX-V 623.56 0.00%

Resource Commodities

Name Last Change
Gold 1213.29 0.22%
Silver 14.30 1.26%
Copper 2.71 0.020
Platinum 843.50 0.95%
Oil 56.25 1.00%
Natural Gas 4.84 15.22%
Uranium 29.18 0.00%
Zinc 1.15 0.00%

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