IKN

Not a fake this time. From today’s edition of Goldman Sachs’ Commodity Watch (dated March 13th)

After trending lower throughout most
of 2014H2, gold prices rallied in the first few weeks of 2015 as US economic
data softened, the CHF peg was unexpectedly removed and European QE was
unveiled. While negative interest rates in Europe
have led to an increase in gold ETF inflows and some support for prices, the
subsequent normalization of US interest rates (10Y TIPS increased from a 3bp
trough in late January to almost 40bps currently) has been the dominant force
pushing prices lower. Indeed, prices have fallen more rapidly than our previous
forecast path suggested. We roll our forecasts forward to $1,270, $1,220 and
$1,100/toz in 3-, 6- and 12-months (from $1,290, $1,270 and $1,175 previously). 

In line with our economist’s forecasts for continued growth, labor market
recovery and increase in US real rates, we maintain our long-held bearish
outlook on gold prices. Consensus now sees the first Fed rate hike arriving in
June, compared to our expectation for a September lift-off. But the exact timing
is likely to be data dependent. As such, we have greater confidence in our
longer-term directional bearish view on gold, while recognizing that the next
few months could see higher volatility.