- October 12, 2010, 11:55 AM ET
Goldman Sachs: Gold Going to $1,650
By Liam Pleven
Gold at $1,400 per troy ounce? Not such a bold prediction these days, with gold hovering around $1,350.
Well, how about $1,500? That’s starting to sound a little bullish.
Could it even reach $1,600 next year?
Ifthatseems like the kind of figure a feverish goldbug mightthrowaround,consider this: Goldman Sachs just raised its 12-monthforecastto $1,650.
Inraising its sights for gold, the Wall Streetgiant cited therecent rallyand persistently low interest rates in theU.S., as well asthe potentialimpact if the Federal Reserve intervenesfurther to propup the economy.
More so-called quantitative easing would be a “strong catalyst todrive gold prices higher,” concluded the analyst, David Greely.
Nooneknows for sure what the Fed will do, or when, but hopes havebeenrisingsince the Fed expressed concern in September that inflationwasactuallytoo low. Gold, of course, if often seen as a hedgeagainstinflationrunning out of control, which suggests the rally may bedrivenby ageneral lack of faith the Fed will be able to calibrateanyinterventionwith precision.
Goldman Sachs’ prior 12-monthforecast for thegold price was $1,365 -only about $12 higher thangold’s settlementprice on Monday, the daythe bank issued the report.But the higherprediction came with acaveat, that gold prices could getpushed downwhen the U.S. economystrengthens and the Fed startstightening monetarypolicy.
And what are the chances of that happening soon?
“Asdiscussedby our U.S. economists, models suggest that it might infacttake until2015 or longer before a rate hike became appropriate,”Mr.Greely wrote,though he added that the bank’s economists “emphasizethatthis is ascenario, not a formal forecast.”