Gold may rally more than 20 percent from this month’s record to a high of $1,650 an ounce in 12 months as the Federal Reserve takes action to stimulate the U.S. economy, according to Goldman Sachs Group Inc.
Bullion may gain to $1,400 an ounce in three months and $1,525 an ounce in six months, analysts David Greely and Damien Courvalin wrote in a note dated yesterday. Gold for immediate delivery reached an all-time high of $1,364.77 on Oct. 7.
The Fed is considering whether to add to its purchases of Treasury bonds to spur the economic recovery, an action known as quantitative easing. The central bank may next month announce purchases of about $500 billion, Goldman Sachs said in a separate e-mailed note.
“With U.S. real interest rates pushing lower off the slowdown in the pace of the U.S. economic recovery and the growing prospect of another round of quantitative easing, we expect gold prices to continue to climb,” New York-based Greely and Courvalin wrote.
Spot bullion fell 0.3 percent to $1,349.90 an ounce at 2:50 p.m. Melbourne time, declining for the first time in three days. Gold for December delivery on the Comex in New York dropped 0.3 percent to $1,350.80. The bank in August forecast that gold may rally to $1,300 an ounce in six months.
The analysts recommended buying Comex December 2011 gold futures. They also recommended investors buy Nymex January 2011 platinum, saying that “recovering global automobile demand will likely continue to put upward pressure on auto-catalyst demand and therefore on platinum and palladium prices.”
In the longer term, gold prices will come under downward pressure once the U.S. economy strengthens and the Federal Reserve begins to tighten monetary policy, Goldman Sachs said.
“The rising risk of declining gold prices once the U.S. Federal Reserve begins tightening monetary policy suggests this is a good time for gold producers to begin scaled up hedging of forward production, particularly for calendar 2012 and beyond,” the analysts wrote.