Goldman Sachs is no believer in gold’s rally

LONDON: Goldman Sachs is no believer in gold’s rally, predicting losses over the coming year as the Federal Reserve increases US interest rates no fewer than three times.

“Our economics team forecasts that the Fed will raise rates by 25 basis points three times this calendar year, to 1.3%,” analysts including Jeffrey Currie and Max Layton wrote in a report, forecasting that bullion will trade at $1,000 an ounce by the end of 2016.

Gold has surged in the opening weeks of 2016, gaining to the highest level since June and topping $1,200 on Monday, as sinking equity markets and rising concern about the global economy fanned haven demand. The US economy will grow above-trend this year, boosting inflation expectations, according to the report. Higher rates curb bullion’s appeal as the metal doesn’t pay interest like other assets such as bonds.

The faster growth, as well as the expectations for consumer-price gains, are “forecast to result in an increase in US real interest rates, which under our gold framework is set to drive gold prices down to about $1,000 by yearend,” the analysts wrote.

Gold futures surged to $1,201.40 an ounce on the Comex in New York -- the day that the Goldman report was issued. That’s the highest price since June 19. The active contract traded 0.8% lower at $1,188.70in Singapore, 12% higher this year.