Gold Price Forecast Raised At Goldman Sachs

Thursday, May 12, 2016

gold price forecastGoldman Sachs recently made a key announcement with regard to the price of gold. The investment firm has made the decision to raise its forecast with regard to the price of the commodity. However, the firm remains bearish. Today, we'll talk about the upgrade to the Goldman Sachs price target, why I believe they are wrong with regard to their bearish opinions, and what we can expect to see from the precious metal moving forward.

Goldman Sachs Raises Gold Price Forecast

As mentioned above, Goldman Sachs has made the decision to increase their gold price forecast with regard to what they expect to see in the coming months. Essentially, the increase in the forecast was the result of net speculative positioning, as well as a weaker USD. Previously, Goldman Sachs believed that the three, six, and twelve-month price outlook for gold would come in at $1,100 per ounce, $1,050 per ounce and $1,000 per ounce respectively. However, the firm has raised these expectations to $1,200 per ounce, $1,180 per ounce, and $1,150 per ounce respectively. While this is an improvement, the firm remains bearish on the precious metal. The bearish views are the result of the Federal Reserve's limited ability to surprise and limited room for the dollar to depreciate. In a note, the investment bank had the following to offer:

“Looking ahead, we see limited upside for gold pricing given the limited room for the Fed to surprise to the downside, limited room for the dollar to depreciate, and limited room for China to drive (emerging market) currency strength to contribute to dollar weakness.”

Goldman Sachs Is Wrong - And Right - At The Same Time

While no one can tell the future, I believe that Goldman Sachs made the right move here, but is still wrong with regard to its gold forecast. The bottom line is that I believe gold will continue to grow. While Goldman Sachs has made their forecast on the gold price a bit more bullish, I believe that they are still missing the mark. There are a few reasons for my belief here:

  • The Federal Reserve – In their statement, Goldman Sachs said that the Federal Reserve has limited room to surprise. In a sense, they are right. No one would be surprised if the Fed delayed interest rate increases again. However, this isn't the full picture. You see, the longer the Fed holds off on increasing its interest rate, the more investors are going to realize that the US economy isn't quite as positive as economists are putting off. So, while no one will be surprised if the Fed does continue to delay rate hikes, safe haven investors are likely to continue flocking to gold, lifting demand, and ultimately the price of the precious metal.
  • The USD – I also have a bone to pick with regard to the investment bank's opinion of the USD. The reality is that the USD has been riding on highs for years when compared to other currencies. With limited economic improvement in the United States, I believe that the USD still has plenty of room to decline. This will also lift gold's price in the long run.
  • Market Conditions – As a safe haven investment, when market conditions are negative, investors look to gold. The reality is that market conditions simply don't support declines in the price of gold at the moment as they are concerning at best.

What We Can Expect To See Moving Forward

While Goldman Sachs is expecting to see declines in gold, I remain relatively bullish with regard to what we can expect to see from the precious metal. At the moment, all signs continue to point toward growth in the commodity. 

Joshua Rodriguez

Joshua Rodriguez is an avid financial professional. He is the owner and founder of CNA Finance, a partner at Modest Money, and a writer for US News & World Report, Investing.com, and more! Joshua takes a strong fundamental approach to market analysis and enjoys offering his take on what we can expect moving forward. You can reach Joshua at cnafinancehelp@gmail.com.