Washington (Platts)--1Dec2010/636 pm EST/2336 GMT
Though gold prices are expected to continue to increase over the next 12 months, prices are likely to peak at near $1,750/oz in 2012 as US economic activity picks up and interest rates begin to rise, analysts with US investment bank Goldman Sachs said Wednesday.
The rally in gold will be driven in the short term by the low-interest rate environment, which is likely to continue into 2011, lifting gold to the next target of $1,690/oz, Goldman Sachs commodity and economic analysts said in a report. Fed officials are likely to keep policy very accommodative, analysts said, adding that interest rate hikes are considered unlikely in 2011 and probably would not occur in 2012 either.
"However, with the current round of [quantitative easing] set to end in June 2011, and our US economics team now forecasting strong US economic growth in 2011 and 2012, we expect US real interest rates to begin to rise into 2012, likely causing gold prices to peak in 2011," analysts said.
Goldman Sachs economists on Wednesday introduced an above-trend growth forecast for the US of 3.6% for 2012, and raised their growth forecast for 2011 to 2.7%. The firmer trend in domestic demand along with the little chance that federal fiscal policy will be tightened were the main reasons for the revision, analysts said.
"We expect that the strengthening US economy combined with the end of quantitative easing in the middle of next year will lead to gradually rising US real interest rates in 2011, supported by a steepening of the US yield curve, with our rate strategists' new forecast pointing to 10-year nominal rates at 3.75% by the end of 2012," Goldman Sachs analysts said.
The rally in gold will be driven in the short term by the low-interest rate environment, which is likely to continue into 2011, lifting gold to the next target of $1,690/oz, Goldman Sachs commodity and economic analysts said in a report. Fed officials are likely to keep policy very accommodative, analysts said, adding that interest rate hikes are considered unlikely in 2011 and probably would not occur in 2012 either.
"However, with the current round of [quantitative easing] set to end in June 2011, and our US economics team now forecasting strong US economic growth in 2011 and 2012, we expect US real interest rates to begin to rise into 2012, likely causing gold prices to peak in 2011," analysts said.
Goldman Sachs economists on Wednesday introduced an above-trend growth forecast for the US of 3.6% for 2012, and raised their growth forecast for 2011 to 2.7%. The firmer trend in domestic demand along with the little chance that federal fiscal policy will be tightened were the main reasons for the revision, analysts said.
"We expect that the strengthening US economy combined with the end of quantitative easing in the middle of next year will lead to gradually rising US real interest rates in 2011, supported by a steepening of the US yield curve, with our rate strategists' new forecast pointing to 10-year nominal rates at 3.75% by the end of 2012," Goldman Sachs analysts said.
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