The bank's central thesis is that the U.S. economic recovery finally takes off in 2013, and Goldman expects that to drive a selloff in the gold market as investors rotate away from traditional "safe-haven" investments.
At the time, the analysts wrote, "We lower our 3-, 6- and 12-mo gold price forecasts to $1,825/toz, $1,805/toz and $1,800/toz and introduce a $1,750/toz 2014 forecast. While we see potential for higher gold prices in early 2013, we see growing downside risks."
Now, Goldman has decided to up the ante a bit. Yesterday, its commodity analysts introduced a new call: gold at $1200 per ounce by 2018.
I think Goldman is counting on the fact that, by 2018, no one will remember. We may not even have these here internets any more in five years.
As I recall, a year or so ago, I said I thought that the price of gold should be around $1200 based on the inflation rate to that point. Inflation has continued, as has the deficit spending and the devaluing of the dollar to the point that I do not see $1600 or $1700 as being all that out of line. A lot of things could happen in 60 months to make gold drop to $1200. A lot of things can happen in 6 months. I just seriously doubt that a genuine economic recovery is one of those things.
I'm betting that $1200 gold ain't gonna happen (literally). The economy is just going to take off? Everything back to normal? Grow grow grow like old times? What's going to be the driver?
ReplyDeleteI can see one possible vector at the moment. The domestic natural gas and fracking boom might lead to cheaper energy. That could offset some of the inflationary pressures from our kooky Keynesian monetary policy. But I don't see that equating to any kind of broad or substantial recovery. It would take a huge correction to get to take that much debt out of the system in five years.
ReplyDeleteHey, by the way, I know you said your better half likes silver. Given that it's probably a little more of a commodity than gold, I don't see any short-term downside to it either. If there were to be a breakout in manufacturing, silver demand would probably escalate. Any drop in the speculative/investment market could be eased by industrial demand.
ReplyDeleteI guess for gold to go to $1200 the equivalent drop in silver would be to around $20 or $22. Still not bad.
Well, we are looking at a 20 year horizon so we don't plan on digging up our Viking hoard in 2018. I'm very unworried about PMs future value becaue my long term outlook is grim which should be good for PMs. If I'm wrong, then things won't be grim and we will get by. Besides, our retirement goals are modest. Basically, food.
ReplyDeleteBy the way, that 2525 song creeped me out when I was a kid. I had a vivid imagination.
ReplyDelete