Goldman Sachs sees gold soaring to $1,425 over next 12 months.
In a recent note to clients, Goldman Sachs' analysts announced that the bank is raising its forecast for gold going into 2019, reports CNBC. Goldman's previous forecast was bullish in its own right, with the bank calling for $1,250, $1,300 and $1,350 an ounce over the three, six and 12-month periods, respectively.
But now, the analysts expect gold to inch even higher this year. According to a CNBC article, Jeffrey Currie, Goldman's head of commodities research, said in the note that gold will hit $1,325 in the next three months before moving on to $1,375 by the end of the second quarter. The bank sees gold soaring to $1,425 over the next 12 months.
In the note, Currie explained that the change in forecast centers around a quick reversal of sentiment following a re-emergence of risk, states the article. Whereas the previous year saw many investors chase profits backed by the confidence from a strong dollar, the landscape in 2019 could be markedly different.
Various reports indicate that U.S. growth could be heading towards a slump after a prolonged era of Fed-fueled optimism. The U.S. Purchasing Managers Index (PMI) slipped to a 15-month low in December, with manufacturers' confidence in business likewise dropping to the lowest level in almost two years. According to the article, these economic reports build on existing concerns that the Fed has thus far largely ignored, such as the prospect of peaked-out employment.
Nonetheless, the central bank appears ready to dial down on its hawkish rhetoric, with Fed Chair Jerome Powell recently assuring market participants that officials will be ready to adjust the hiking strategy based on market response.
Currie noted that the traditional correlation between rate hikes and gold could be absent this year. According to the article, despite some feeling that higher rates reduce the appeal of owning bullion, Currie firmly believes that risk aversion and fears of a recession will trump the desire for bigger profits.
Recessionary concerns appeared to be validated last month, when U.S. stocks suffered their worst December since the Great Depression. The performance was especially striking as the final month of the year tends to be a strong one for equities. Gold returned more than 4% in that month, and in doing so outperformed the previously record-setting stock market.
Currie stressed that the shift in sentiment will be a key driver of gold prices this year, reports the article. Besides individual investors, the analyst said that central banks will adjust their strategies in accordance and continue upping their monthly bullion purchases. Governments already showed a heavier-than-usual predisposition towards gold in 2018, with data suggesting that total central bank purchases for the year exceeded 450 tons.
