Goldman Raises Gold Price Forecast to $1,000
Source: Reuters (2/5/09)
"The gold price rally has been driven by surging demand for gold in all forms: physical gold, exchange-traded funds (ETFs), and futures contracts. . ."
Selling of scraps persisted in Asia, driven by gold's recent rise to above $930 as well as fears of falling demand for jewelry during the global economic downturn. Jewelry accounts for nearly 70% of global demand.
Gold was trading at $902.85 an ounce, down $2.00 from New York's notional close, but was within sight of a near four-month high of $930.40 an ounce hit last Friday. Gold struck record at $1,030.80 last March.
"There's still some physical selling around. After the Chinese New Year, people continue to sell gold to take profits," said Dick Poon, manager of precious metals at Heraeus in Hong Kong.
Investment bank Goldman Sachs (GS.N) raised its forecast for the price of gold to $1,000 an ounce in the next three months from its previous forecast of $700 due to rising investor demand for safe haven assets.
"The gold price rally has been driven by surging demand for gold in all forms: physical gold, exchange-traded funds (ETFs), and futures contracts as investors seek 'a safe store of value' amid the financial distress and inflation risks," it said in a report. "In fact, this recent surge in gold ETF demand would more than offset a 20% decline in the fourth quarter global jewelry demand for gold," it said.
The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said it held a record of 859.49 tonnes of gold as of February 4, up 6.12 tonnes from February 2.
Analysts said passage of President Barack Obama's nearly $900 billion proposed economic stimulus package would likely be inflationary and bullish for gold, and a failure would be bearish.