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Goldman: Balancing Act Between Growth Worries & Real Rates, Short Vol

GOLD

Goldman Sachs note that they have are revised their gold and silver price forecasts lower, on account of the “interplay of real rates and U.S. growth risks.” Their new 3-, 6- & 12-month gold price forecasts are $1,850, $1,950 & $1,950/oz (from $2,100, $2,300 & $2,500/oz previously).

  • They write “the main conclusion is that in the current environment of tightening policy and persistent recession concerns, the tactical direction of gold will be determined by shifts in Fed priority function between inflation fight and growth support. More structurally gold is likely to remain range-bound as growth and tightening factors continue to offset each other. For gold to form a structural trend higher, the Fed would need to find itself facing intense questions about its commitment to fighting inflation, as was the case in the 70’s. For gold to form a material downside trend inflation would have to keep surprising to the upside and the Fed be willing to deliver on the "unconditional" resolve to bring it back to target similar to Volcker in the 80’s.”
  • “Both are not our base case. We, therefore, favour volatility selling strategies and open a short September 2023 ATM straddle trade recommendation and simultaneously close our long Dec 2023 gold futures trade.”
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Goldman Sachs note that they have are revised their gold and silver price forecasts lower, on account of the “interplay of real rates and U.S. growth risks.” Their new 3-, 6- & 12-month gold price forecasts are $1,850, $1,950 & $1,950/oz (from $2,100, $2,300 & $2,500/oz previously).

  • They write “the main conclusion is that in the current environment of tightening policy and persistent recession concerns, the tactical direction of gold will be determined by shifts in Fed priority function between inflation fight and growth support. More structurally gold is likely to remain range-bound as growth and tightening factors continue to offset each other. For gold to form a structural trend higher, the Fed would need to find itself facing intense questions about its commitment to fighting inflation, as was the case in the 70’s. For gold to form a material downside trend inflation would have to keep surprising to the upside and the Fed be willing to deliver on the "unconditional" resolve to bring it back to target similar to Volcker in the 80’s.”
  • “Both are not our base case. We, therefore, favour volatility selling strategies and open a short September 2023 ATM straddle trade recommendation and simultaneously close our long Dec 2023 gold futures trade.”