Flashback to 2015: Goldman Sachs Was Bearish on Gold



Rate-hike conundrum 2015

In 2015, all investors had their eyes set on the interest rate hike in the United States coming from the FOMC (Federal Open Market Committee). The rate-hike phenomenon remained the most crucial element affecting precious metals, especially gold prices.

As we know, rising interest rates hurt gold. Gold is a commodity that bears no interest. If Treasuries pay more interest—above zero, in this case—investors may prefer these higher-interest vehicles to gold. When the interest rate hike happened, gold plunged about 10% in 2015 as interest rose by 25 basis points.

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Goldman’s outlook

Even as the first month of 2015 saw positive returns for gold, Goldman Sachs remained pessimistic for gold in 2015. The bank had six-month and 12-month forecasts for gold averaging $1,270 and $1,175 per ounce, respectively. Downward sticky inflation numbers and manufacturing data had left the markets and the Fed in dismay in 2015. However, the rate hike finally took place in mid-December.

Goldman Sachs expected gold prices to end 2015 at $1,190 per ounce and to fall to $1,000 per ounce in 2016. The bank also lowered its 2016 average gold price from $1,200 to $1,050 per ounce back in January 2015. The long-term sentiment for gold remained bearish at the start of 2015.

Such a bearish outlook extended to mining-based companies, which saw their margins suffer in 2015 due to lowered precious metals prices. Companies such as Buenaventura (BVN), Hecla Mining (HL), and Primero Mining (PPP) saw share price losses in 2015.

Precious metals had already started pricing in the interest-rate rise, and ETFs such as the iShares Gold Trust ETF (GLD) and the iShares Silver Trust ETF (SLV) reacted negatively.


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