Gold Recovers Slightly As Goldman Sees Tough Year Ahead

Gold rose from the lowest close in more than three years to pare a weekly loss that was spurred by the U.S. Federal Reserve’s decision to begin tapering stimulus. Goldman Sachs Group Inc. said that bullion’s decline isn’t over as it heads for the biggest annual drop since 1981.

The metal for delivery in February rose 0.2 percent to $1,195.70 an ounce by 7:13 a.m. on Comex in New York, bringing the drop this week to 3.2 percent. Futures fell 3.4 percent yesterday to $1,193.60, the lowest settlement since Aug. 3, 2010. The metal will drop to $1,050 by the end of next year, Goldman Sachs said.

Gold is heading for the first annual decline since 2000 after investors lost their faith in precious metals as a store of value. The Fed said on Dec. 18 it will cut monthly asset purchases, known as quantitative easing, to $75 billion from $85 billion. U.S. equities jumped to a record. Exchange-traded products backed by bullion lost about $73 billion in value this year, and mining companies wrote down at least $26 billion.

“Gold is now likely to grind lower throughout 2014,” Jeffrey Currie, Goldman’s head of commodities research in New York, said in a telephone interview. “Much of the expected price decline has been priced in as opposed to a more gentle process as the Fed backs away from QE. When the gold market sees these events, it usually tries to price it in immediately.”

via Bloomberg

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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 has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. 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