Goldman: The Japanese Earthquake Makes For A Good Time To Buy More Gold

Goldman likes gold, and sees it going to $1480/oz.

We expect gold prices to rally toward our 3-month price target of $1480/toz, and continue to recommend a long gold trade

While the protests and threat to oil supplies in the Middle East and North Africa drove COMEX gold prices to a new record high of $1437/toz on March 2, the events in Japan have paradoxically sent gold prices back below $1400/toz despite the ongoing decline in US 10-year TIPS yields.

Given the decline in US real interest rates, we see the recent retracement in gold prices as offering a good buying opportunity, and maintain our long gold trading recommendation as we expect gold to rally to our 3-month price target of $1480/toz.

However, over a longer term, Goldman isn’t so bullish

We expect gold prices to move higher throughout 2011, but continue to believe that gold at current price levels is a compelling trade, not a long- term investment. In particular, we expect that as US real interest rates rise with the recovery in the US economy, gold prices will likely reach a peak in 2012.

This chart is instructive, showing how the Japanese earthquake has created a rare divergence between interest rates and gold.


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