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(Wallace Refiners) – Investment bank Goldman Sachs has downgraded its gold forecast on Wednesday. They now believe higher real interest rates are already reflected in the precious metal’s price and the move higher could continue once higher rates are fully priced in. Real interest rates exclude the effect of inflation.
The firm still sees upside for gold and its new target is $2,000 per troy ounce down from the previous estimate of $2,300/oz. This is about 11% above where gold futures currently trade today. Goldman Sachs cut the forecast pointing to a rotation into riskier assets as a reason for the metal’s under-performance.
The daily chart of gold shows that we are around 11% away from Goldman’s target price. That would make it around $209 away. The gold price has been under some significant pressure of late with the rise in US yields being the main catalyst. The yellow metal has found itself out of favour as investors flock to safe-haven bonds as they yield.
Looking at the chart the black resistance level at $1767/oz has held well and if the move higher continues the red zone should be watched as it is the mean value area of the current consolidation.
Should the support level break to the downside the next support stands at the red horizontal line near $1671/oz. Today in the EU session the gold price is still under pressure and this is despite the greenback falling. Stocks seem to be the biggest beneficiary as the FTSE 100 and the DAX trade in positive territory. It has to be said the German 10-year yield has also reached a yearly high of 0.267 today.
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