uploads///Gold and Silver price Performance

Goldman Sachs Stayed Bearish over Gold’s Rally


Apr. 8 2016, Published 10:24 a.m. ET

Goldman Sachs’ bearish outlook

In the previous part, we discussed the increasing flow of money in gold-based assets. Top Wall Street banks also have a view on gold that investors consider crucial. Gold rallied almost 17% in the first two months of 2016. However, Goldman Sachs remained a non-believer in gold’s rally. Investors were stuck in a risk-off mode because most of the investment avenues were underperforming.

The commodities market was deserted at the beginning of the year. Gold emerged as the number one performer. Silver closely followed the returns in gold. As of April 5, 2016, gold and silver futures have a year-to-date gain of 15.6% and 9.2%, respectively.

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Precious metal–based funds

According to analysts at Goldman Sachs, the systematic risks from the sudden slide in the stock markets, oil rout, and negative interest rates likely weren’t justified. Therefore, gold that had backing from these unforeseen events. It could plunge. Goldman Sachs maintained a negative outlook for gold.

Goldman Sachs expected gold prices to end 2015 at $1,190 per ounce. It expected gold prices 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 in January 2015. The long-term sentiment for gold remained bearish at the beginning of 2015.

Such a bearish outlook extended to mining-based funds like the VanEck Vectors Gold Miners ETF (GDX) and the Direxion Daily Gold Miners ETF (NUGT). The two funds also followed negative returns in gold in 2015.

The mutual funds that take their price fluctuations from precious metals include the First Eagle Gold Fund A (SGGDX), the WF Precious Metals Fund (EKWAX), and the Tocqueville Gold Fund (TGLDX).


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