Goldman raises gold price forecast, expecting US dollar weakening
Goldl traded just above US$1747 per troy ounce on Monday morning in Europe. Over the last 2 months, prices for gold declined slightly as hope for containing the pandemic has raised the risk sentiment and stopped the rally caused by the global spread of Covid-19 in mid-March.
However on Friday, Goldman Sachs updated its 3-, 6- and 12-month gold price forecasts to US$1,800/1,900/2,000/oz from US$1,600/1,650/1,800/oz and maintained a long gold trading recommendations.
Goldman analysts explain the recent hesitation of the gold market by the struggle of two opposing forces: the negative impact on prices shock "wealth" consumers of emerging markets and a positive factor in investment demand in developed markets.
Meanwhile, demand for gold coins has increased by 30% since the beginning of the year, the total weight of gold in the ETF (exchange funds that buy gold) has increased by 20% year on year, and there is a large volume of hidden demand for gold, according to analysts of the commodity market Goldman Jeff Kerry, Michael Sprogis and Daniel Sharp.
The combination of improved risk sentiment in developed markets as major economies ease quarantine, and the fact that emerging markets are likely to need more time to recover, may suggest that gold prices are expected to correct.
The weakening of the dollar is important insofar as the price of the precious metal is calculated in the U.S. currency. If the dollar loses in the value of other assets, then gold is not worth the mansion. As a rule, the weakening of the dollar is the result of an increase in money supply for public spending against the background of a simultaneous increase in inflation.
Long side winds, short counter winds
The inability of gold to gain growth may also be explained by the fact that the market is tired of its correlation with the volatility of "risk-offs", according to James Steele, HSBC Chief Analyst for Precious Metals.
Whatever his pace, Steele noted on Friday that a broad economic recovery will inevitably affect gold, but the underlying factors of gold prices should be a low yield environment, significant fiscal and monetary incentives and the impact of inflation on asset prices.
While gold may fall in the near future, HSBC sees these key factors supporting gold prices, especially as the global economic recovery is replete with potential traps. Analysts have suggested, for example, that rising unemployment, when the U.S. Government Protection Program and the historic tax stimulus package expire, may lead to a broad transition to gold.
Gold will reach $1800 in the coming months, according to UBS.
Massive monetary stimulus from the European Central Bank and the Bank of England is also considered positive for gold, along with an unprecedented fiscal stimulus. EU leaders on Friday discussed the formation of the block recovery fund of 750 billion euros (841 billion dollars).