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Goldman Sachs Says It's Time to Short Gold


Despite global economic uncertainty, Goldman expects gold to fall to $1,450 an ounce by the end of 2013, and to $1,270 an ounce by the end of 2014.

While major US equity indexes continue to push into uncharted territory, commodities have taken a backseat so far this year. As investors keep pouring into stocks and increasing their overall risk appetites, safe haven assets like gold have faltered. Year-to-date, gold has dipped just over 7%, while the S&P 500 (INDEXSP:.INX) has jumped over 11% during the same time period.

And though some believe equities are due for a major correction, which would certainly help out the precious metal, others have adopted a much more bearish outlook on gold. This week, Goldman Sachs (NYSE:GS) voiced its opinion on the precious metal: Short gold.

Goldman Slashes Gold Forecasts

After already turning even more bearish on the metal, Goldman Sachs once again slashed its short- and long-term gold forecasts for 2013. In a letter to its clients, analysts at the company stated, "We see risk to current prices as skewed to the downside as we move through 2013. In fact, should our expectation for lower gold prices continue to prove correct, the fall in prices could end up being faster and larger than our forecast."

According to the report, Goldman now expects gold to fall to $1,450 an ounce by the end of the year; the company's original forecast was around $1,810, which was then revised down to $1,600 at the end of February. By the end of 2014, the company believes the precious metal will falter even more, falling to $1,270.

Goldman also cut its short-term outlook, cutting its three-month forecast from $1,615 to $1,530 an ounce. In six months, the company expects gold to fall even further to $1,490 as compared to the previously expected $1,600 level. Goldman's 12-month gold outlook also fell from $1,550 to $1,390.

Questioning Gold's Safe Haven Status

Though bullish momentum has been an undeniable force on Wall Street since the start of 2013, there have been some significant red flags seen around the globe. From a slew of recent disappointing US economic reports, to the Cyprus debacle sparking a resurfacing euro risk, the global economic landscape still remains on shaky ground. Despite this, investors have not turned towards gold as a safe-haven asset like they have in the past.

Because of the commodity's rather uncharacteristic price movements in recent months, Goldman analysts say: "With our economists expecting few ramifications from Cyprus and that the recent US slowdown will not derail the faster recovery they forecast in 2H13, we believe a sharp rebound in gold prices is unlikely."

Whether you agree with Goldman's bearish outlook or not, it will be interesting to see how exactly the year will pan out for the precious metal. Any indication of the Fed scaling back or stopping its massive stimulus measures may have investors rushing back into gold.

Follow us on Twitter @CommodityHQ

Editor's note: This article by Daniela Pylypczak was originally published on Commodity HQ.
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