GOLDMAN SACHS FORECAST GOLD AT $1,350 NEXT YEAR
Gold extended its decline from Friday on what appears to be a continuation of profit-taking in both the metals and the dollar. The dollar has continued to rally from oversold conditions and has posted another solid gain, which put pressure on oil, which is lower, precious metals and other commodities. It also put some pressure on the equity market as a stronger dollar makes it more difficult for manufactures and other industries to export products.
Goldman Sachs forecast that gold will reach $1,350 an ounce next year. They see silver at $22.50 an ounce and oil at $92.50 a barrel. This morning on CNBC, analyst Scott Redler said gold is in the process of working its way through a profit-taking correction and consolidation. He thinks there is a good chance that $1,140 will hold. His firm is looking to buy the dips in the gold market, as they believe this is just a temporary consolidation in an overall longer-term bull market. Michael Jansen of JP Morgan-Chase Bank said to the Dow Jones Wire Service this morning, "While the fall in gold and rise in dollar are likely a knee-jerk reaction to the unemployment data Friday, 'we still think the FOMC and other G3 central banks are on hold for a very long time to come, allowing liquidity to underpin the entire sector for some months yet'." Clearly they see this as a temporary correction within the context of a longer-term bull market as do many other analysts.
While gold is currently trading on the key futures contract at $1,144 it had dipped as low as $1,136, testing support at the $1,135 level. As that support held, the metal bounced back and it is reasonable to assume that a bottom will be found here in the very near term. Once year-end book squaring is out of the way, gold will be better positioned with a stronger base to move in the next leg higher. Dow Jones Wire Service also quoted another analyst saying, "The trend remains up but a further correction is possible to unwind the 'overextended readings on charts and excess speculative longs'." Tom Kendal of Mitsubishi Bank told Dow Jones Wire Service that while gold could trade lower, it wouldn't be the end of the rally. "The world hasn't changed in one day," alluding to the employment figure and suggesting that the factors that have driven gold to these high levels have not changed at all." As Scott Redler said this morning, this correction is serving to shake out the weak holders of gold and leave gold in very strong hands for another substantial move higher.
Standard Bank's analyst said they expect the dollar to resume its weakening trend into 2010. That should be again; bullish for gold as they New Year begins. With the government running trillion dollar deficits as far as the eye can see and bank problems continuing with six more banks failing over the weekend, it is likely that the gold bull market will continue and the dollar bear market will continue. Therefore, corrections such as these present excellent buying opportunities for investors.
Those who would like to use dollar cost averaging strategies may also begin to step up into this market. I think it's also useful to consider utilizing Goldline's Price Guarantee Program, which provides a two-week window of opportunity to re-price your transaction in the event of a continuing correction. Call Goldline today at 1-877-341-2646 for details on the PGP Program. Be sure you ask for the free gold investor information package. Call Goldline at 1-877-341-2646.
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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.
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