Goldman Sachs has raised its medium term gold price forecast to $1,355, but reckons prices will fall from 2011 and recommends producers sell gold forward.”
So reads the Mineweb headline from 15 July 2010. Something to bear in mind when you consider reports we’ve seen over the last few days about how Goldman is again calling the end of the gold bull market.
Following Wednesday’s losses, precious metals staged a mini-recovery yesterday – helped as ever by physical demand from Asia (with reports of strong Indian demand in particular). Jim Sinclair’s website links to an Arabian Money story about how China’s Ministry of Industry and Information Technology expects Chinese gold demand to surpass 1,000 tonnes a year by 2015 (last year the country’s demand was 769.8 tonnes). Combine this with the continuing strong demand from other Asian countries, and you’ve got firm support for higher gold prices.
In more general economic news, the phrase “triple-drip recession” is slowly entering the lexicon of British financial journalists. Grim manufacturing data out from the UK’s Office of National Statistics this morning shows that output from this sector fell by 1.3% from September to October, and was 2.1% lower than in October 2011. Analysts had expected just 0.2% declines for both figures.
Sterling has held up relatively well against gold over the course of this year, though more depressing data will put an end to this if it causes traders to reassess the UK’s prospects. As long as inflation remains stubbornly high – a little over 3%, despite the deflationary headwinds from the continent – there’s not much wriggle room for the Bank of England to engage in more money printing.
Consider also that the BoE has been the most aggressive of any major central bank in terms of the relative increases in the size of its balance sheet since 2008, and it should be obvious that the pound is swimming in very dangerous waters.