August 12, 2010, 4:24 AM EDT
By Kim Kyoungwha
Aug. 12 (Bloomberg) -- Gold may rally to a record $1,300 an ounce in six months, driven by low interest rates and the prospect of renewed quantitative easing in the U.S., according to Goldman Sachs Group Inc.
“The recent selloff has left speculative long positions in gold oversold relative to U.S. real interest rates,” analysts David Greely and Damien Courvalin, wrote in a note yesterday. This has “set the stage for a rally to our six- month gold-price target of $1,300 an ounce,” they wrote.
The Federal Reserve has resorted to direct bond purchases, also known as quantitative easing, as part of its response to the world financial crisis. The U.S. central bank said this week that it would reinvest principal payments on mortgage holdings into long-term Treasury securities to support growth.
Gold for immediate delivery, set for a 10th annual advance, touched an all-time high of $1,265.30 an ounce on June 21. The precious metal was at $1,201.35 at 3:10 p.m. in Singapore.
Long positions are bets that prices may gain. Real interest rates are the difference between nominal interest rates and inflation.
Still, there may be a considerable risk gold will drop in the longer term if the Fed tightens monetary policy earlier than expected, the analysts said.
Goldman recommended buying platinum for October delivery on the New York Mercantile Exchange as recovering global automobile demand will likely continue to put “upward pressure” on autocatalyst demand, the report said.
--Editors: Matthew Oakley, Jarrett Banks.
To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net
To contact the editor responsible for this story: Jim Poole at jpoole4@bloomberg.net
Source: http://www.businessweek.com/news/2010-08-12/gold-may-rally-to-record-1-300-goldman-predicts.html
