Goldman Sachs Reduces '08 Base Metals Forecast, Maintains $750 Gold

Source:

As Goldman Sachs economists continue to expect the U.S. dollar to strengthen on a 12-month horizon of expectations of a narrower U.S. current account deficit, we believe that gold prices will decline to $750/toz, limiting returns from precious metals in 2008.

Demand concerns and rising supply have convinced Goldman Sachs commodity analysts to forecast a "retrenchment in commodity prices from recent highs, which has already largely occurred."

Noting that base metals are most closely related to the industrial cycle with expected global economic activity expected to decline, commodities analysts reduced their 2008 base metals forecasts, but added they "still expect prices to reach historically high levels in some cases by year-end."...

Meanwhile, the analysts also forecast that a stronger U.S. dollar will pressure gold prices lower next year. "We recommend opening a short position in gold-deferred contracts."

In their analysis, Goldman Sachs asserted that "on a longer-term horizon, structural supply-side drivers have become increasingly supportive to commodity prices...

London Gold: "We continue to expect gold prices to trade inversely with the U.S. dollar given gold's currency-like properties of being a store of value and a medium of exchange. As Goldman Sachs economists continue to expect the U.S. dollar to strengthen on a 12-month horizon of expectations of a narrower U.S. current account deficit, we believe that gold prices will decline to $750/toz, limiting returns from precious metals in 2008. However, structural support provided by stagnant supply growth and demand from consumers, central banks and investors will likely keep gold prices at historically high levels.

12-month gold price forecast: $750/toz

Related Articles

Get Our Streetwise Reports Newsletter Free

A valid email address is required to subscribe