Dow Jones Commodities Service’s Rhiannon Hoyle reports:
Gold prices will likely continue to trend higher in 2011, supported by a fresh round of quantitative easing in the U.S., before recording a peak around $1,750 a troy ounce in 2012, Goldman Sachs said in a report Wednesday.
The investment bank said it expects downside risks for the precious metal, which has rallied 25% since the start of the year, to increase as economic growth and real interest rates recover.
“At current price levels gold remains a compelling trade, but not a long-term investment,” it said. “With the current round of [quantitative easing] set to end in June 2011, and our U.S. economics team now forecasting strong economic growth in 2011 and 2012, we expect U.S. real interest rates to begin to rise in 2011, likely causing gold prices to peak near $1,750/oz in 2012.”
In the report, Goldman suggested it is a good time for gold producers to begin scaling up hedging of forward production, particularly for 2012 and beyond.