Goldman Predicts Gold Drop

Investors should short gold, one of the best performing assets this year, Goldman Sachs said, as it believes a recent rally triggered by concerns over the health of the global economy has been overdone.

Bullion has gained about 13 percent in 2016 as worries over negative interest rates and their impact on the banking sector sent investors scurrying out of equities and into safe-haven gold.

Concerns over the Chinese economy and fears of a U.S. recession also helped gold post one of its biggest rallies in years. Prices hit a one-year high of $1,260.60 an ounce last week.

But Goldman Sachs said prices will roll back.

“Fears around China, oil and negative interest rates have likely been overstated in the gold price and other financial markets,” Goldman Sachs said in a note dated Monday.

“We are recommending shorting gold through a GSCI-style rolling index,” it said, referring to the S&P GSCI commodity index.

Goldman expects prices to fall to $1,100 in three months and $1,000 in 12 months.

Gold has already given back some of its gains, falling below $1,200 early on Tuesday as equities rebounded.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza