Platinum to beat gold: Goldman SachsEnjoying the ride.
Platinum to beat gold, says Goldman Sachs
Platinum may be a better investment bet than gold, analysts at Goldman Sachs have said.
By Richard Evans
Published: 6:26PM GMT 14 Jan 2010
The bank said gold could face competition for investors' money following the launch of new exchange-traded funds (EFTs) that make it easy to gain exposure to platinum and palladium, another precious metal.
"Gold EFTs may face increased competition for investor demand in 2010 from the introduction of both the platinum and palladium ETFs," Goldman said.
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This could put downward pressure on the gold price but could have the opposite effect on platinum and palladium, it added. "While these new physical-backed ETFs present a downside risk to gold ETF demand and gold prices, they represent an upside risk to platinum prices. We continue to recommend a long position in platinum as a 'gold-plus' trade."
The bank described demand for gold EFTs as "rather muted", adding: "The holdings of gold EFTs have been essentially flat over the past six months at around 47m ounces. Should the investor demand for gold not return to the market this year, upside for gold prices would be further limited."
This was not the only possible cause of a fall in the gold price, however – Goldman said a tightening in American monetary policy posed the biggest risk. "An earlier-than-expected tightening of US monetary policy is the dominant downside risk to gold prices this year," it said.
However, the bank did not believe that tightening would actually take place and as a result it forecast a gold price of $1,350 in a year's time. It said: "Goldman Sachs economists continue to expect that the US Federal Reserve will not raise its short-term interest rate target in either 2010 or 2011, and we continue to expect that the resulting low real interest rate environment will continue to support gold prices.
"Consequently, we are maintaining our current gold price forecast of $1,350 on a 12-month horizon."
Gold was steady on Thursday, awaiting direction from currency markets, as the dollar fluctuated on weak US retail sales data and dollar-supportive comments from the European Central Bank. The spot price of gold was $1,139 in early afternoon trading in London.