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Goldman Sachs Raises 12-Month Forecast to $1,880

Release Date: 
Thursday, August 11, 2011

Goldman Sachs raised its 12-month forecast for the price of gold to $1,880 per ounce while several analysts continue to cite factors supporting gold. "More important as a driver of gold currently is the search for safety, driven by fears over global growth and the potential for sovereign debt downgrades in the U.S. and Europe, as well as the likelihood of the funds rate remaining unchanged until 2013," said UBS in a note. Goldman Sachs and VTB Capital also provided their outlook.

"We believe that gold prices will continue to rise as ten-year US TIPS yields are at an historic low, a diminished outlook for US economic growth suggests US real rates will remain lower for longer, gold prices in inflation-adjusted terms remain well below their 1980 highs, and sovereign debt concerns intensify in the US and Europe," said Goldman Sachs in a research note.

"Escalating fears over peripheral debt troubles in the euro zone and of a sovereign downgrade on France, with the country's banking sector taking a heavy hit yesterday due to hefty exposure to Italy" may boost demand for gold, said Andrey Kryuchenkov, an analyst at VTB Capital in London.

Market turmoil is forcing central banks to shift policy regarding their currencies. Central banks in Japan and Switzerland said they would rein currency appreciation while the U.S. Federal Reserve promised to keep rates near zero for at least two more years. "With the authorities in both Japan and Switzerland announcing intentions to intervene to weaken their currencies, gold remains the last protection against the potential for widescale money printing as governments seek to recapitalize their banks and restimulate their economies," UBS said in a research note.

(Sources: "Goldman Sachs: gold price to push $1900 within 12 months," China Business News, August 10, 2011; "PRECIOUS-Gold eases from record high after CME margin hike," Reuters, August, 11, 2011; "Gold Slips From Record High After CME Margin Hike," CNBC, August 11, 2011; "Gold Declines From All-Time High as CME Increases Contract Margins by 22%," Bloomberg, August 11, 2011)

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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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