Caution: Goldman Says Short Gold

While major U.S. equity indexes continue to push into uncharted territory, commodities have taken a backseat so far this year. As investors keep pouring into stocks and increasing their overall risk appetites, safe-haven assets like gold have faltered. Year-to-date gold has dipped just over 7%, while the S&P 500 has jumped over 11% during the same time period [for more gold news and analysis subscribe to our free newsletter].

And though some believe equities are due for a major correction, which would certainly help out the precious metal, others have adopted a much more bearish outlook on gold. This week, Goldman Sachs voiced its opinion on the precious metal: short gold.

Goldman Slashes Gold ForecastsGold

After already turning even more bearish on the metal, Goldman Sachs once again slashed its short- and long-term gold forecasts for 2013. In a letter to its clients, analysts at the company stated “We see risk to current prices as skewed to the downside as we move through 2013. In fact, should our expectation for lower gold prices continue to prove correct, the fall in prices could end up being faster and larger than our forecast.”

According to the report, Goldman now expects gold to fall to $1,450 an ounce by the end of the year; the company’s original forecast was around $1,810, which was then revised down to $1,600 at the end of February. By the end of 2014, the company believes the precious metal will falter even more, falling to $1,270 [see also 50 Ways To Invest In Gold].

Goldman also cut its short-term outlook, cutting its three-month forecast from $1,615 to $1,530 an ounce. In six months, the company expects gold to fall even further to $1,490 as compared to the previously expected $1,600 level. Goldman’s 12-month gold outlook also fell from $1,550 to $1,390.

Questioning Gold’s Safe-Haven Status

Though bullish momentum has been an undeniable force on Wall Street since the start of 2013, there have been some significant red flags seen around the globe. From a slew of recent disappointing U.S. economic reports, to the Cyprus debacle sparking a resurfacing euro risk, the global economic landscape still remains on shaky ground. Despite this, investors have not turned towards gold as a safe-haven asset like they have in the past.

Because of the commodity’s rather uncharacteristic price movements in recent months, Goldman analysts say: “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.”

Whether you agree with Goldman’s bearish outlook or not, it will be interesting to see how exactly the year will pan out for the precious metal. Any indication of the Fed scaling back or stopping its massive stimulus measures may have investors rushing back into gold.

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Disclosure: No positions at time of writing.

About Daniela Pylypczak

Daniela Pylypczak-Wasylyszyn is a regular contributor to CommodityHQ.com, where she primarily focuses on commodity producers equities. She is also an analyst for ETFdb.com, where she contributes articles and analysis each week. Since joining the team in 2011, Daniela has quickly grown to be one of the most widely-followed authors in the industry. Her articles are syndicated in a number of online publications, including Financial Advisor Magazine, Fidelity.com, and Yahoo! Finance. Daniela is also a contributor for TraderHQ.com and Dividend.com. Daniela graduated from DePaul University with a bachelor’s degree in finance and economics.
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