Goldman Expects Gold Prices To Climb To The Highest In More Than 5 Years

(Jan 13, 2019 - Bloomberg)

Goldman Sachs Group Inc is leading a pack of bullish voices cheering for gold.

The New York-based bank’s analysts led by Jeffrey Currie have raised their price forecast for gold, predicting that over the next 12 months, the precious metal will climb to US$1,425 an ounce — a level not seen in more than five years.

Bullion has benefited as rising geopolitical tensions fuel central bank purchases while fears of a recession helped boost demand from investors seeking “defensive assets,” they said.

Even exchange-traded funds are piling into bullion, taking their holdings to the highest since May last year.

Spot gold gained 0.1 percent to US$1,288.34 an ounce on Friday, up 0.4 percent for the week.

Speculative interest in the gold signals that investors are not only closing bearish bets, but are also adding to their bullish position, Suki Cooper, a New York-based analyst at Standard Chartered PLC, said in a note.

Gold is also getting a boost from mounting speculation that the US Federal Reserve might pause in raising borrowing costs, boosting the appeal of non-interest-bearing metal.

“We expect the safe haven bid, and to a lesser extent, gold’s inflation-hedge properties, to remain key drivers of the metal’s price in 2019, complemented by a resurgence of physical demand,” Cantor Fitzgerald analysts led by Mike Kozak said in a report.

Gold and silver are “looking good in 2019,” underlining a potentially positive indicators that “should drive a bullish case” for both metals “and as a result, the related equities as well,” Kozak said.

Palladium, once considered an unattractive byproduct of platinum mining until the rise of catalytic converters in the 1970s, is breaking new records.

Spot palladium peaked at an all-time high of US$1,344.41 an ounce on Wednesday. It settled at US$1,322.25 on Friday, up 1.1 percent for the week.

Over the past month, it has been more costly than gold, which has not happened since 2002.

From a point a decade ago, when an ounce of platinum bought more than 5 ounces of palladium, it now buys about 0.6 ounces.

Even the weak conditions in the auto industry, which consumes about four-fifths of the world’s palladium, might not be enough to offset the situation.

The real driver of palladium catalyst demand in the past few years has been not so much rising volumes of car sales, but tighter emissions regulations that require larger amounts of the metal in each car sold.