During a panel discussion at the Commodities Week conference in London last week, Jeffrey Currie, head of commodities research at Goldman Sachs,
called gold and other precious metals a “slam-dunk” sellonce the fiscal crisis in Washington was resolved.
The deal struck by Congress Wednesday only reopens the government until January 15 and raises the debt ceiling until February 7, so it hasn’t quite been resolved yet. As a result, it seems as if chances are increasing that the Federal Reserve will continue to delay tapering back its quantitative easing program.
In a note to clients today, Currie says he’s not ready to short gold just yet:
Gold is still waiting for data confirmation of a US rebound that can support tapering even as the lack of a lasting US resolution could delay tapering
Gold is back to where it was when the US debt ceiling debates started, as the risks of deferred tapering erased any optimism that was generated late last week. We continue to argue that the key to the gold outlook is data that shows a strong US recovery and gives the market confidence that tapering will begin. We still believe that this is the key trigger for gold prices even as the risks of deferred tapering have increased. Accordingly, we still expect gold to trade close to our near-term target of $US1300/toz until the end of this year when our economists expect economic data to begin to show some confirmation of the economic improvement embedded in the 2014 US outlook.
This more optimistic 2014 US economic outlook is what drives our economists’ expectations for tapering next year (whether it starts in December, March or June), which combined with a stronger dollar and weaker emerging market currencies, suggests that the investment and monetary demand for gold will create significant downside risks for gold prices in 2014. Accordingly, we are maintaining our end of 2014 gold price target of $US1050/toz.
Today, gold is trading around $US1315 an ounce.
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