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Goldman 12-Month Forecast: Gold May Move Higher

Release Date: 
Friday, January 13, 2012

Gold moved lower on the New York Spot Market, trading at $1639.50 per ounce at 6:22 a.m. Pacific Time with silver at $29.87 per ounce.

Goldman Sachs said it expects new gains in the price of gold this year due to the depressed real interest rate environment. It places its 12-month forecast for gold at $1,940 per ounce.  Other analysts have also weighed in on low interest rates supporting gold and other precious metals.

"We still like the gold story because of negative real interest rates," said Deutsche Bank analyst Michael Lewis.  He also noted other longer-term indications that may be positive for gold. "We have central bank diversification, which we think is a bigger flow story than exchange-traded fund buying. We're also looking for dollar weakness to come back," Lewis said.

"Interest rates in the euro zone are unlikely to go higher... keeping the euro area yields depressed," said VTB Capital in a note.  "Additional liquidity and accommodative monetary policy will cause even more players to seek real value in precious metals as inflation expectations also start to shift, provided policy measures are successful and growth starts recovering."

Eighteen of 23 surveyed by Bloomberg expect gold prices to gain next week, the highest proportion since Nov. 11, when mainland China imported record amounts of gold from Hong Kong.

A rise in the rupee to its highest level in five weeks has prompted Indian jewelers to continue stocking up on gold ahead of the upcoming wedding season.  China overtook India in the third quarter of 2011 as the largest gold-jewelry market, according to the World Gold Council.

(Sources: "PRECIOUS-Gold eases as euro dips, heads for weekly gain," Reuters, January 13, 2012; "China Gold Hoarding Turns More Traders Into Bulls: Commodities, " Bloomberg, January 13, 2012)

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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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