PredictIon Gold Prices Goldman Sachs 2012

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PredictIon Gold Prices Goldman Sachs 2012
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Wall Street investment bank Goldman Sachs (NYSE:GS) predicts that gold's bull run will continue into 2012 with a low interest rate environment and continued Europe debt worries, but gold stocks will likely continue to fail to match the yellow metal's rise.

As of earlier this week, gold was up 10.8 percent in 2011 and 43 percent since January 2010, driven by a continued decline in US real interest rates as growth has slowed, governments cutting interest rates in an attempt to kick-start growth, and inflation kicking in owing to energy and food costs.

The investment bank expects the gold price to remain at recent high levels, peaking at over $1,900 per ounce in 2012 and averaging $1,810 per ounce.

Looking ahead, Goldman Sachs said the price of gold will remain strong due to US real rates remaining low; continued monetary demand for physical gold from central banks and institutional investors on continued concerns over paper currencies; and muted risk appetite due to events in Europe and a general sluggish recovery - keeping gold's demand as a lower-risk asset class.

"Our economists’ central thesis is that US real rates will remain low given limited appetite to slow the fragile US recovery or hurt the all-important job growth in an election year. Inflation from non-domestic sources (e.g. imported oil) will also lower US real rates," the report said.

The biggest risk to Goldman Sachs' view, however, is the potential for the US dollar to strengthen on an extreme risk-off mindset from investors.

Gold could also potentially be lumped in with other, high-risk assets as investors opt for cash. The default currency for that type of move is the US dollar, which would naturally strengthen against other currencies and gold. The consequence would be a lower US dollar gold price, "which to some extent we have seen recently, with spot gold down to around $1,660/oz", the investment bank said....READ MORE