Gold Falls, Trimming Three-Week Gain as Goldman Cuts Forecasts
London (Jan 23) Gold fell, paring gains after a three-week rally, as Goldman Sachs Group Inc. said low inflation and higher U.S. interest rates will drag down prices later this year.
Goldman cut its estimates for 2016 and 2017, predicting that prices will average $1,089 and $1,050 an ounce, according to a report Friday. The New York-based bank said bullion will be supported at current levels for the next few months, citing weaker-than-expected U.S. economic data and more stimulus from the European Central Bank.
Bullion for February delivery declined 0.2 percent to $1,298.50 an ounce by 7:24 a.m. on the Comex in New York. Prices are near the highest level since August after climbing 1.7 percent this week. Gold for immediate delivery lost 0.3 percent to $1,297.80, according to Bloomberg generic pricing.
“We continue to expect that gold prices will decline,” Goldman analysts including Max Layton wrote. “Our confidence in lower gold prices for longer has increased on the back of lower expected inflation in the coming years.”
Gold has jumped 9.6 percent this year as stagnating economies challenged policy makers to find new ways to buoy growth. ECB President Mario Draghi pledged to buy 60 billion euros ($67 billion) a month through September next year in a push to put more cash in circulation and revive inflation.
Federal Reserve policy makers meet next week to discuss interest rates as inflation hovers below a 2 percent target and the economy shows improvement.
Traders and analysts surveyed by Bloomberg were positive on gold for the eighth straight week, citing demand for a haven. The number of bullish responses outstripped bearish ones by 15 to 8. The euro weakened today on concern an anti-austerity party will take power in Greek elections this weekend.
Silver for February delivery retreated 0.2 percent to $18.315 an ounce. Prices are set for a third weekly increase, the longest run since July. Palladium fell 0.8 percent to $766 an ounce and platinum lost 1 percent to $1,272.50 an ounce.
Source: Bloomberg
