Goldman Sachs: Gold Is A Value Buy

Goldman Sachs note that "gold has corrected heavily as a more hawkish Fed led to moderation in tail risk inflation expectations. As a result of the liquidation, gold is now again pricing a Goldilocks scenario of moderate inflation and continued global recovery and is thus trading at a large discount to the market real rate. We estimate that the current gold price is consistent with a 10-Year real rate of 0.10% vs the -0.87% that is currently priced by the market. In our base case that the global recovery continues uninterrupted and inflation remains subdued, we expect this discount to persist and see just modest upside to gold. Our price target remains $2,000/oz. However, in a scenario where the global economic recovery does not play out as expected or inflation begins to move above expectations, we see material upside to gold given its undervaluation and low allocation from the investment community. Therefore, we think that gold may be a good value purchase here for portfolio managers looking to hedge against tail risks of macro volatility."