Gold price set to fall further, forecasts Goldman Sachs
More stable economic situation and higher real interest rates will encourage investors to seek returns elsewhere, say analysts
The price of gold fell some $20 to $1277 an ounce on Monday and Goldman Sachs predicted further falls over the next couple of years as the more stable economic situation and higher real interest rates encouraged investors to seek returns elsewhere.
Even the growing popularity of gold as a wedding present in India, the biggest retail market for the precious metal, cannot stop the price tumbling further according to the investment bank.
Analysts at Goldman said hints by the Federal Reserve chairman, Ben Bernanke, that he is preparing to restrict the supply of cheap central bank funds has triggered the steep decline.
"We expect that gold prices will decline further given our US economists' forecast for improving economic activity and a less accommodative monetary policy stance.
"We expect this decline in prices to coincide with rising jewellery/retail demand, which we view as price responsive and not price setting," it added.
The bank said the price would fall to around $1,050 an ounce by the end of next year. Last autumn gold fetched almost $1,800 an ounce, up from nearer $600 an ounce in 2006.