Goldman Sachs expects gold prices to rise in near term
New York (Jan 25) Goldman Sachs Group Inc. on Friday slashed its 2015 price forecasts for several base metals including copper and aluminium while raising its estimate for gold by $62 per ounce.
"The primary reason for the changes to our forecasts is cost deflation ñ driven by a combination of actual and anticipated US dollar strength, cheaper energy and other input costs, and our expectation of an improvement in mining productivity," Goldman Sachs said.
Weaker-than-expected Chinese and European demand has also contributed to the deflationary environment, it added. Goldman cut its 2015 average copper price forecast to $5,542 per tonne from $6,400, and aluminum to $1,788 per tonne from $2,075.
The bank slashed its 2015 average price view for lead to $1,838 per tonne from $2,350, nickel to $16,550 a tonne from $17,500, and zinc to $2,138 per tonne from $2,425.
The investment bank expects nickel, zinc and palladium to substantially outperform copper in 2015.
Goldman increased its 2015 average price forecast for gold to $1,262 per ounce from $1,200, saying the downward trend for prices since mid-2013 has been well short of its expectations.
The bank expected gold prices to rise in the near term citing recent factors, including weaker-than-expected US economic data, the run-up to an announcement on the quantitative easing measures by the European Central Bank and the unexpected decision by the Swiss National Bank to remove its cap on the Swiss franc against the euro.
However, the bank saw lower gold prices in the longer term, mainly due to expectations of lower inflation, lower energy prices having a deflationary effect on gold's mining marginal cost and a stronger US dollar.
Goldman expects gold prices to resume declining in the third quarter, in line with the start of the expected hike in interest rates by the US Federal Reserve.
Goldman slashed its 2016 average gold price outlook to $1,089 per ounce from $1,200.
For platinum, the bank decreased its 2015 average price estimate to $1,250 per ounce from $1,381. There could be more downside pressure on platinum with continuing strength in the US dollar and further downside in the South African rand. South Africa is a major producer of platinum.