Gold’s price cycle has probably turned as the recovery in the US economy gathers momentum and investment holdings collapse, according to Goldman Sachs Group Inc, which reduced forecasts for the metal.
The bank cut its three-month target to US$1,615 an ounce from US$1,825 and lowered the six and 12-month forecasts to US$1,600 and US$1,550 from US$1,805 and US$1,800.
Goldman reversed an assumption exchange-traded products holdings will expand this year, analysts Damien Courvalin and Jeffrey Currie wrote in a report on Monday.
Gold has dropped 5 percent this year as economic data improved, equities advanced and some US central bankers sought more flexibility in their stimulus program. An inevitable unwinding of gold’s 12-year bull market has begun, Credit Suisse Group AG said on Thursday in a report. ETP holdings are poised for the biggest monthly decline since January 2011.
“The turn in the gold cycle has likely already started,” the Goldman analysts wrote in the report, after predicting an end of gold’s bull run in a note on Dec. 5 last year.
“The latest collapse in gold ETF holdings stands in sharp contrast to our assumption that ETF positions were likely driven by longer-term allocation rather than short-term trading,” the analysts said.
Gold for April delivery traded at US$1,592.80 an ounce on the Comex at 1:49pm in Singapore, poised for a fifth monthly drop in what would be the worst run since 1997. Holdings in ETPs, also known as exchange-traded funds, fell to a five-month low of 2,536.289 metric tonnes yesterday and have shrunk 2.9 percent this month, data compiled by Bloomberg show.
Billionaire investors George Soros and Louis Moore Bacon cut their stakes in gold ETPs last quarter, while John Paulson maintained his share, government filings showed this month.