GOLDMAN: The Stage Is Set For A Gold Rally
Courvalin and Currie are bearish on the metal, but say the rally could have further to run this year:
Near-term upside on delayed taper but still bearish into 2014
The FOMC unexpectedly decided not to taper the rate of its asset purchases, preferring to wait for further confirmation of improvement in the US economic outlook. This announcement, as well as Bernanke's press conference, was more dovish than most had expected, pushing gold prices to $1,365/toz. The decision, combined with the upcoming debt ceiling debate, leaves risks to gold prices as skewed to the upside in the near- term, in our view.
However, with gold prices already back near their pre-June FOMC level, COMEX net speculative positioning already back at its April level as well as growing pressures on EM gold demand, we believe that this upside will ultimately prove limited (see Neutral gold prices near- term but still expecting new lows in 2014, September 17, 2013). We believe this is well illustrated by today's more muted rally in gold prices when compared to the significant rally in 10-year TIPS yields, helping close the significant valuation gap that had occurred between both assets over the past month.
As a result, we re-iterate our neutral stance on gold prices and continue to expect that gold prices will resume their decline heading into 2014 when we expect economic data to solidly confirm a reacceleration in US growth and warrant a less accommodative monetary policy stance.
Gold is up 4.6% today in the wake of the Fed's decision, trading at $1367 an ounce.