Previously we’ve discussed the historical accuracy of investment bank Goldman Sachs when it comes to making commodity price predictions, particularly oil and gold. Goldman made a high profile bearish call on gold a few weeks ago, a prediction which proved to be spot on. On Tuesday, Goldman reversed its bearish gold stance in the short term. That’s potentially good news for the gold market, at least in the near term.
According to CNBC, the firm’s commodities research team said the decline in gold was “more rapid than it expected,” and it exited the trade with a potential gain of 10.4 percent, below its original target price of $1,450.
Goldman had previously forecast that gold would close out 2013 at $1,450 per ounce, then take a hit in 2014 with a predicted close of $1,270. Within days of that call, gold fell almost 16 percent to a low of $1,321 an ounce. As CNBC pointed out, “While the bailout of Cyprus did not send gold higher, reports that Cyprus would sell gold to cover its shortfall sent the metal tumbling, as traders bet other European countries might also sell gold to raise cash.”
Goldman said the surprisingly rapid decline was probably accelerated by breaks in “well-flagged technical support levels.” With the investment bank no longer on the short side of gold, the yellow metal has another reason for establishing a low in the coming days and weeks.