COMEX Gold: Stronger US growth to create short term downside – Goldman Sachs

The research team at Goldman Sachs sees short term downside for gold at $1276/oz with our 3/6/12-mo price targets $1200/1200/1250/oz.

Key Quotes

“Since having a $60/oz correction in mid-March, gold rebounded strongly to reach new ytd highs driven by a more dovish tone by the Fed, reversal of pro-growth Trump trades, and increased geopolitical uncertainty. The move was in line with the fall in US real rates and weakening of the dollar. Despite the fact that net speculative positioning on COMEX has halved since the election, it remains at elevated levels compared to its history and particularly the post 2013 period when the Fed began to gradually scale down its QE programme. Since February, gold ETFs have continued their gradual upward trend, albeit not at the same pace as in 2016, as increased political and economic uncertainty created hedging demand for gold.”

“Price Outlook: We see short term downside for gold at $1276/oz with our 3/6/12-mo price targets $1200/1200/1250/oz. Although it is possible that further unwinding of the Trump related equity trades or escalation in heightened geopolitical tensions pushes gold even higher in the next several weeks, we think that over the next three months improvement in US hard growth data and subsequent increase in real rates would bring gold prices down.

Longer-term we still remain agnostic on gold as our primary commodity view is one of a stronger cyclical backdrop and how the US central bank responds to this environment and hence the path real interest rates follow is still uncertain. Accordingly, we maintain our 12-month target at $1250/toz.”