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Why Goldman Sachs is Wrong About Gold

by Jerry Robinson on December 5, 2012 · 4 comments

Goldman Sachs is telling its clients that gold prices may have already peaked and that they expect prices will decline next year.

This week, the behemoth investment bank lowered its 2013 price forecast for gold claiming that an increase in real interest rates and positive economic growth numbers next year will prevent the Federal Reserve from pumping anymore money into the U.S. economy.

A note to Goldman clients stated:

“Medium term however, the gold outlook is caught between the opposing forces of more Fed easing and a gradual increase in U.S. real rates on better U.S. economic growth. Our expanded modeling suggests that the improving U.S. growth outlook will outweigh further Fed balance sheet expansion and that the cycle in gold prices will likely turn in 2013.”

  • Goldman reduced its 3-month price target on gold from $1,840 to $1,825.
  • It lowered its 6-month target from $1,940 to $1,825 an ounce.
  • And its 12-month target dropped from $1,940 to $1,800 an ounce.

Additionally, the firm lowered its 2014 gold price outlook to $1,750.

While it is true that gold prices have run into some resistance over the last several months, the fundamentals that are driving gold higher have not changed.

Global central banks continue to print currency while buying large amounts of gold. China and India remain large buyers of the yellow metal. And individual investors in the U.S. are just beginning to warm up to precious metals as a viable investment through ETFs.

None of the structural problems facing the U.S. economy have been resolved. Tensions abound in the Middle East and in Central Asia. Europe is a wreck and the UK is facing an ongoing recession. Meanwhile, the U.S. dollar is losing its preeminence in the global economy.

Therefore, I believe to call a top in gold here is unwise.

Gold began the year at $1,561 per ounce and has gained 8.5% year to date.

Gold Trader Alert: Those who like to profit from the short term moves in gold would do well to pay particularly close attention to the 200 day moving average in the days ahead. If gold is able to hold above its 200 day moving average, gold could run back up to its 50 day moving average. Gold has moved into oversold territory and is due for a bounce.

Why Goldman Sachs is Wrong About Gold Prices

 

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Jerry Robinson
Jerry Robinson is the author of Bankruptcy of Our Nation: Your Financial Survival GuideIn 2010, Jerry created FTMDaily.com with a mission to wake up Americans and share with them the principles of true financial and spiritual liberty. Every Tuesday he hosts the FTMWeekly Radio, a podcast covering economic and geopolitical topics.Jerry has been blessed to be able to lecture around the globe on the topic of economic and geopolitical trends. He holds a degree in Economics from the University of Tulsa and resides in the beautiful Ozark mountains with his beautiful wife and son. Jerry is a licensed life insurance agent. See more
Jerry Robinson
Jerry Robinson
Jerry Robinson

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wyona magee December 6, 2012 at 10:26 am

Jerry, I’ve found a mutual fund that is inflation sensitive, meaning it should perform well in an inflationary environmment, but not as well when stocks are doing well. The fund has REITS, TIPS, Gold, Silver, Agruculture and Oil in it. In 2010 it paid 12.9, 2011 paid 8.9 and averaging 3.9 for 2012 (due to stock performance). My belief is that things in both the economy and the world are going to get much worst and that the dollar will loose most of its purchasing power and eventually loose it reserve status. In light of that, what do you think of this type of mutual fund? I am well diversified and this fund would be an alternative to individual stocks.

Jerry Robinson December 6, 2012 at 10:47 am

Hi Wyona,

This mutual fund sounds similar to our P.A.C.E. (Precious Metals, Agriculture, Commodities, and Energy) investing philosophy. Just watch out for excessive fees.

wyona magee December 10, 2012 at 6:21 pm

Jerry, thanks for taking my personal phone call. I didn’t know that I could roll over some or all of my IRA and do my own trades. I actually went with Scottrade because they have a office near me and operate just like e-trade. Once I have the account set up I will need help selecting stocks and being notified when to buy & sell.

When the account is set up, I’ll call your office again.

. .

Jerry Robinson January 7, 2013 at 1:49 pm

No problem Wyona. You can find all of my daily stock trading ideas at TriggerTradeReport.com Happy investing!

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