The Conversation (2)
Analysts at the investment bank are keeping a slightly bearish outlook for the precious metal.
Gold had a strong start to the year, reaching a quarterly peak of $1,257.64 an ounce in February as investors turned to safe-haven assets.
Even so, the gold price is far from the $1,300 mark, which it last breached before the US election last year. And some market watchers believe that if strength in the US economy continues it will not pass $1,300 anytime soon. Notably, analysts at Goldman Sachs (NYSE:GS) are now calling for a gold price of $1,200 in the next three months.
“The key catalysts we see for this move will be markets repricing to reflect higher US rates, a faster Fed balance sheet normalization, increased expectations of US tax reform, and stronger [economic] growth,” analysts at the firm said in a note released this week.
That said, the writing isn’t on the wall yet. Other analysts believe that increased tension in North Korea or slower-than-expected US and global growth could challenge Goldman Sachs’ gold price forecast.
“Every now and again, something geopolitical, or financial market-related causes people to knee-jerk buy gold, but the two key drivers over any extended period of time have been dollar debasement and inflation,” Troy Gayeski, a senior portfolio manager at SkyBridge Capital in New York, told Bloomberg.
Gold has fallen almost 1.6 percent this week, giving back gains made after US Donald President Trump unveiled details for a tax reform plan. On Thursday (April 27), the yellow metal was trading at $1,264.76 as of 2:00 p.m. EST.
Trump is of course a major gold price influencer. Many market participants still believe that his unpredictability could boost the yellow metal’s price this year, as it has done since before he was elected
But others believe that economic data will be more important in the upcoming months. For instance, faster economic growth could prompt investors to move money from bullion to higher-yielding assets. As Mitsubishi (TSE:8058) analyst Jonathan Butler said to Reuters, “[c]hange in investor sentiment to a more pro-growth mindset is a major risk to gold.”
Similarly, John Stephenson of Stephenson & Co. Capital Management told Bloomberg, “[t]he US economy is strong despite Trump. While his impulsiveness and unpredictability may lead to a rally in gold, it would be hard to see it going to more than $1,350, unless a nuclear war on the Korean peninsula was breaking out.”
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.