After a four-day rally that sent gold above $1,200 an ounce for the first time since June, the momentum started to fizzle on Tuesday as Goldman Sachs Group Inc. predicted the gains won’t last.
Goldman analysts including Jeffrey Currie and Max Layton said gold will trade at$1,000 an ounce by the end of 2016 as the Federal Reserve increases U.S. interest rates no fewer than three times. Fed Chair Janet Yellen is scheduled to appear before U.S. lawmakers this week in Washington.
Gold has risen 13 percent this year, the best start since 1980 and the most of any metal on the Bloomberg Commodity Index. Mounting concerns over global economic growth have boosted demand for haven assets, and spurred speculation that the Fed will hold off on raising U.S. interest rates this year. The U.S. will still grow above-trend this year, according to the Goldman report.
“Whenever we have a major Fed speaker prepared to talk, traders pull back on gold,” George Gero, a vice president of global futures at RBC Capital Markets in New York, said in a telephone interview. “We think that a major Fed speaker such as Yellen is going to reiterate being data dependent and pressing ahead for the rate hikes.”
Gold futures for April delivery lost 0.2 percent to $1,195.50 an ounce at 10:59 a.m. on the Comex in New York, snapping four days of gains, the longest rally in a month.
Faster U.S. growth, as well as the expectations for consumer-price gains, are “forecast to result in an increase in U.S. real interest rates, which under our gold framework is set to drive gold prices down to about $1,000 by year-end,” the Goldman Sachs analysts wrote. Higher interest rates reduce the appeal of precious metals, which don’t pay interest.
Holdings of the metal in exchange-traded funds increased for a 16th straight day on Monday, the longest run since 2012.
“The higher it goes, the more investment money it attracts,” David Govett, head of precious metals at Marex Spectron Group in London, said by e-mail.
Silver futures for March delivery slid 0.2 percent to $15.395 an ounce on the Comex. On the New York Mercantile Exchange, platinum gained, while palladium dropped.
Source: Bloomberg
