What is going on with gold? While it is normal for opinion to be divided on the merits of an investment—that’s why there are buyers and sellers—sharply contrasting trends seem to be giving gold investors whiplash.
The price of gold Wednesday is hovering over $1,600 an ounce, having fallen more than 1% on the day. Investors may be reacting to a Goldman Sachs report released Monday that declared the 12-year run the commodity has enjoyed to be finally over.
The influential investment firm cut its 3-month forecast steeply to $1,615 an ounce from $1,825, and its 12-month price target to $1,550 from $1,800, Bloomberg reports.
Yet gold futures had a banner day Tuesday, soaring nearly 2%, their biggest gain of the new year—a day after Goldman issued its report. Did investors not believe the behemoth bank but are having second thoughts today?
Recent mixed signals may account for the zigzagging. Gold tends to rise on bad economic news, and fall on positive news.
The Goldman report was all about a strengthening of the economy and also placed particular emphasis on the minutes of the Federal Open Market Committee’s meeting last month, which were made public last week.
Several committee members advocated a slowing of Federal Reserve asset purchases. The Fed, as part of its third round of quantitative easing, is buying bonds at a rate of $85 billion a month.
Wrote the Goldman report’s authors, analysts Damien Courvalin and Jeffrey Currie: