Goldman Forecasts Gold Rally Amid Debt-Ceiling Confrontation

Monday, January 21, 2013
By Paul Martin

By Glenys Sim
Bloomberg.com
Jan 21, 2013

Gold may climb over the next three months as U.S. lawmakers attempt to tackle the country’s debt ceiling and the world’s largest economy slows, Goldman Sachs Group Inc. said, advising investors to place bets on advances.

“We see current prices as a good entry point to re- establish fresh longs,” analysts Damien Courvalin and Alec Phillips wrote in a Jan. 18 report. The bank reiterated a three- month target of $1,825 an ounce, as well as a forecast for prices to weaken in the second half as the U.S. economy rebounds.

Gold fell 5.5 percent last quarter, the worst performance since 2008, on expectations for a recovery and potential end to central bank stimulus in the U.S. An advance to $1,825 would be consistent with rallies into debt-ceiling decisions, the analysts wrote. Since 1960, Congress has raised or revised the debt limit 79 times, according to the Treasury Department.

“The uncertainty associated with these issues, combined with our economists’ forecast for weak U.S. GDP growth in the first half of 2013 following the negative impact of higher taxes will push gold” to the three-month target, they wrote.

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