GOLDMAN SACHS RAISES 12-MONTH GOLD FORECAST
Gold prices are volatile on a stronger dollar and reports that billionaire investor John Paulson cut his holdings in the SPDR Gold Trust. “A stronger U.S. dollar would limit the upside in gold for now,” Andrey Kryuchenkov, an analyst at VTB Capital in London, wrote today in a report. Still, “the stalemate in Europe cannot be resolved overnight, while concerns over excess liquidity on both sides of the Atlantic as a result of lax monetary policies also add to a positive gold scenario.” (Bloomberg, 11/15/11)
Analysts have offered differing views on what prompted Paulson’s decision to reduce his gold ETF holdings. "Redemptions from ETFs don't always mean the outright liquidation of gold positions: in the past some investors have chosen to move to less-transparent ETFs or other types of gold exposure," UBS analyst Edel Tully said in a note. Other analysts say the move may be linked to fund redemptions as Paulson's Advantage Plus fund lost nearly half of its value by the end of September after sharp falls in some of its equity holdings such as Bank of America and Hewlett Packard. (Reuters, 11/15/11)
U.S. stocks are volatile as investors digest better-than-expected U.S. economic data and ongoing fears about the Eurozone debt crisis weighed on investor sentiment. While the latest manufacturing data and retail sales for the U.S. was positive, Italy’s 10-year bond yield again topped 7% Tuesday, a possible benchmark signaling that Italy may require a bailout. Adding to worry over the Eurozone, the 10-year bond yield for Spain jumped as high as 6.3%. "Given sovereign bond yields are creeping back up again across the eurozone, and preliminary third-quarter GDP numbers from France and Germany reporting in-line with expectations, any upside for the equity market is likely to be capped," said Manoj Ladwa, senior trader at ETX Capital to CNN Money. (CNN Money, 11/15/11)
Forbes Magazine is reporting that analysts at Goldman Sachs have raised their 12-month gold forecast based on volatility in the Eurozone and continued low interest rates in the U.S. A change in leadership for both Italy and Greece has done little to assuage investor fears this week and the Federal Reserve is unlikely to raise interest rates while growth in the U.S. economy remains sluggish. The Fed has pledged to keep rates at historical lows through 2013. Goldman Sachs latest forecast for gold prices stands at $1,930 an ounce, an increase of 3.8% from the previous forecast. (Forbes, 11/14/11)
†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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