Talking Numbers

Trader: Why Gold Is Worse Than Goldman Says

Talking Numbers

Goldman cut its forecast for gold to $1,270 by the end of 2013 and $1,050 for 2014. But, are gold prospects even worse than that?

If you bought gold in the past couple of years, Goldman Sachs wants you to know you overpaid.

Back in early April, Goldman suggested traders short gold when it was in the upper-$1,500s per troy ounce. It then turned neutral on bullion two weeks later, forecasting a $1,450 price target.

Goldman’s now back saying gold will end the year at $1,300. And, they think it’s downhill from there. The company sees the yellow metal ending 2014 at $1,050. Not only does Goldman say central bank gold buying won’t be enough to support bullion, they don’t believe growing jewelry demand will help, either.

Gold prices have generally stayed below $1,300 since the start of trading in Asia this week. Gold was slammed last week when Federal Reserve Bank Chairman Ben Bernanke suggested a tapering of the Fed’s bond buying program can occur soon. The Fed has been purchasing $85 billion per month in government and mortgage bonds since 2012. Dubbed “QE2” (the second round of quantitative easing), it has helped to push bond prices up and yields down while adding dollars into the economy. A tapering of the program is believed to be counter-inflationary and that has been a factor in bringing down gold prices.
What does Goldman’s negative outlook on gold mean for the precious metal? We talk numbers on gold with Kathy Lien, Managing Director of FX Strategy for BK Asset Management, and Talking Numbers contributor Enis Taner, Global Macro Editor at RiskReversal.com. Lien and Taner look at Chinese and Indian demand and whether Goldman is being generous on its 2013 gold forecasts.

To hear Lien and Taner analyze gold, watch the video above.

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