Goldman raises gold price forecasts

REUTERS: Goldman Sachs raised its gold price forecasts, citing the fall in U.S. real rates and intensifying sovereign debt issues in both the United States and Europe.

“We expect gold prices to continue to climb in 2011 and 2012 given the current low level of U.S. real interest rates,” the Wall Street bank said in a note to clients on Monday.

The 10-year U.S. TIPS yields are at an historic low and a diminished outlook for U.S. economic growth suggests U.S. real rates will remain lower for longer, the bank said.

While the level of U.S. real interest rates is viewed as the primary driver of gold prices over the medium term, continued strong monetary demand for gold from both gold exchange-traded funds and central banks creates an upside risk to its forecasts, Goldman said.

The investment bank raised its three-month gold price forecast to $1,645 per troy-ounce, from $1,565, still short of all-time high for spot gold above $1,715 an ounce on Monday. It also upped its six-month and 12-month forecasts to $1,730 per troy-ounce and $1,860 per troy-ounce, respectively.

Goldman continued to recommended initiating a long COMEX December 2011 position.

Gold has gained more than 20 percent so far this year.