By Michelle Smith — Exclusive to Gold Investing News
Goldman Sachs (NYSE: GS ) was bullish on gold going into 2012 and still is. It recently l owered its US interest rates forecast for commodity returns, but maintains its expectation that gold will reach $1,940 an ounce this year, and continues to encourage long positions.
Goldman Sachs' bullish attitude toward gold is undoubtedly based on numerous factors, but interest rates and the state of the US economy are prevailing themes that appear to top the firm's list of considerations. An October report from the company noted “a remarkable correlation” between US real rates and gold prices. “As we expect gold prices will continue to be driven in large measure by the evolution of US real interest rates and with our US economic outlook pointing for continued low levels of US real interest rates in 2012, we continue to recommend our long trading positions in gold and reiterate our 12-mo price target of $1,860/toz,” the firm said. In November, Goldman Sachs revised its forecast up to $1,930/oz, again pointing to low interest rates and slow growth in the US. 2012 is not the first year that Goldman Sachs has been bullish on gold, nor the first time that the sentiment is heavily based on US interest rates. In 2010, the company highlighted falling interest rates and expressed an expectation that the rates would move even lower, helping to boost gold prices. The conditions prompted Goldman Sachs to raise its price forecast for gold, and to recommend long December 2011 COMEX gold positions. It was a good call, as gold did rally in 2011. In November, Goldman Sachs reported a gain of $423.9/oz and announced that it was rolling the gold trade recommendation into a long December 2012 COMEX gold future position.