Goldman Sachs Outlook On Gold No Bueno
Goldman Sachs doesn’t have a bullish outlook for precious metals. The investment banking firm foresees prices dropping to $1,000 in 12 months as the Federal Reserve maintains a quiet quantitative easing program.
Gold has increased 8% since mid-July and currently trades for $1,165 per ounce.
“A marked increase in Chinese official sector physical gold purchases during 3Q15 also likely supported gold prices,” Goldman said in the note. The bank anticipates a 25 basis point rate hike at the December Federal Open Market Committee (FOMC) meeting followed by 100 basis points of rate increases during 2016.
“Our base case remains for higher U.S. real rates and lower gold prices, albeit with there being risks that the gold price weakness is pushed out further should the Fed surprise us and remain on hold in December,” Goldman said.
Goldman Sachs predicted the gold price to fall from $1,100, $1,050, and $1,000, in 3, 6 and 12 months from now – marking a 14 percent decline from current levels.
Of course, banks have run up against problems regarding their honesty towards many of their products and services. As GoldSilverBitcoin wrote before:
Department of Justice antitrust division prosecutors have kicked off an investigation into the price-setting process for gold, silver, platinum and palladium, which takes place in London, and has recently been changed, as GoldSilverBitcoin covered here. The Commodity Futures Trading Commission has also opened a civil investigation into the old process.
According to Wall Street Journal, the banks are HSBC Holdings Plc, Bank of Nova Scotia, Barclays Plc, Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc, JPMorgan Chase & Co, Societe Generale, Standard Bank Group Ltd and UBS Group AG.
Formal requests have been made for information. The CFTC subpoenaed HSBC Holdings PLC regarding precious-metals trading, the banks disclosed in its annual report, released Monday.
According to the bank, the Justice Department has asked about documents relating to the antitrust investigation which took place in November. German regulator Bafin looked into the scandal, saying at the time that the potential precious metals manipulation case could be worse than Libor.
Major banks have been bearish on gold throughout the recent consolidation. This trend is clearly continuing.