Goldman Sachs has cut its forecast on gold for the end of this year to $1,300/oz (from $1,435). The revision is even more drastic in the medium term, predicting a fall to $1,050/oz by the end of 2014 (from $1,270/oz).
Medium term, we expect that gold prices will decline further given our US economists’ forecast for improving economic activity and a less accommodative monetary policy stance. Further, with QE tapering likely to start soon, perhaps even a bit sooner than previously anticipated, we are fast forwarding on our real rate path.
Central bank gold buying is not expected to be enough to offset the fall in prices.
However, prices are expected to bounce back in the longer term.
While this forecast implies that the unwind of physical gold investments will push gold prices below its marginal cost of production, we expect that the ensuing likely decline in mined output will over the longer term maintain prices near $1,200/toz , which remains our forecast for 2015 and beyond.