The turn in the gold price cycle is accelerating after a 12-year rally as the recovery in the U.S. economy gains momentum, according to Goldman Sachs Group Inc., which reduced forecasts for the metal through 2014.
The bank cut its three-month target to $1,530 an ounce from $1,615 and lowered the six- and 12-month predictions to $1,490 and $1,390 from $1,600 and $1,550. Goldman recommended closing a long Comex gold position initiated on Oct. 11, 2010 for a potential gain of $219 an ounce, analysts Damien Courvalin and Jeffrey Currie wrote in a report.
Gold dropped 5.7 percent this year on speculation that the Fed may pare its stimulus amid an economic recovery. The gold price is in bubble territory, Societe Generale SA said in an April 2 report. Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, declined to about 1,200 metric tons Tuesday, the least since June 2011. Deutsche Bank AG cut its 2013 gold outlook by 12 percent, citing a strengthening dollar and a lack of haven buying.
“Despite resurgence in Euro area risk aversion and disappointing U.S. economic data, gold prices are unchanged over the past month, highlighting how conviction in holding gold is quickly waning,” the Goldman analysts wrote in the report. “While higher inflation may be the catalyst for the next gold cycle, this is likely several years away.”
Gold for June delivery on the Comex in New York fell 0.4 percent to $1,580.10 an ounce as of 7:28 a.m. local time. The metal advanced 1.1 percent in March as policy makers wrangled over Cyprus’s 10 billion-euro ($13 billion) bailout.
The bank cut its 2013 gold estimate to $1,545 an ounce from $1,610, trimmed its 2014 forecast to $1,350 from $1,490, and set year-end targets of $1,450 in 2013 and $1,270 in 2014. Goldman recommended starting a short Comex gold position, targeting $1,450 with a stop at $1,650, the analysts wrote.
Deutsche Bank lowered its 2013 gold forecast to $1,637. The metal averaged a record $1,669 last year and the 12 straight annual gains in London were the best run in at least nine decades.
Holdings in ETPs, also known as exchange-traded products, have shrunk 7.6 percent this year, compared with gains in silver, platinum and palladium, data compiled by Bloomberg show. They were 2,432.3 tons, compared with an all-time high of 2,632.5 tons in December. Speculators are holding a gold net-long position of 47,164 contracts in the week ended April, U.S. Commodity Futures Trading Commission data show.
“We believe a sharp rebound in gold prices is unlikely,” Goldman said. “The fall in prices could end up being faster and larger than our forecast, as aggregate speculative net long positions across Comex futures and gold ETFs remain near record highs.”
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