Goldman waits for evidence of bottom in gold's slump

Goldman Sachs has said that it is waiting for evidence of a bottom in gold's slump saying that momentum is to the downside. The bank will retain its short gold view and maintains a three month bullish forecast for copper and crude.

Our reporter Yogesh Chandarana:

Gold’s potential doesn’t stack up when compared to other asset classes. Peter Sullivan of HSBC argues that European equities – particularly in the UK, where he forecasts earnings per share to rise by 9 per cent this year – look attractively valued. He likes high yield, high-beta stocks in the energy, food retail, telecoms and financial sectors, arguing that they “offer attractive valuations in a low interest rate world”. Sullivan is not alone: over the next three years, Anders Nielsen of Goldman Sachs is expecting strong returns from global equities.

Given that gold does not pay a yield, and downside risks are prevailing, many investors will fancy their chances in equities, rather than holding what has become a speculative trading commodity. And since equities will find support from central bank easing programmes (the Bank of Japan recently joined the list of aggressive monetary activists), they should continue to perform well.


Nevertheless, some are still confident that gold is worth holding. Investec’s Hillcoat argues that it still has safe-haven appeal: “We retain a positive view on gold on the basis that the world’s economic problems are not solved.” Julian Jessop of Capital Economics agrees, arguing that if nations were forced to sell their reserves, the need for safe-havens would be back in vogue, and gold prices could rise once again.

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