E Is Goldman Sachs Too Pessimistic In Forecasting A 10% Gold Price Hike?

Goldman Sachs (GS) has just revised its predictions for the gold price for 2019. The Wall Street titan now predicts a good but not a great year for the yellow metal with its price rising a credible 10 percent to $1,425.

Actually, in the present troubled financial markets, it is rather strange that this classic safe haven and portfolio diversifier is not already priced much higher.

Looking Back

Then again, looking back at an article I wrote in late 2009 when Dubai was in $59 billion default and the world looked about to end, I was surprised to see that gold was then only priced at $1,195 an ounce.

But in 2009 the gold price did go up 25 percent, and I wonder if that is not a more appropriate benchmark for 2019 than the latest guidance from Goldman Sachs. Could it be that their precious metals’ team would actually agree, but house policy does not?

Still after 2009 all the real action for the yellow metal came in the next two years with the top in October 2011 of $1,923.

My then early support for gold as the most important asset class in that period was completely vindicated. Only silver delivered a better performance within any major asset class with investors tripling their money.

Could it be that history will at least rhyme if not exactly repeat itself? For while it is true that economic circumstances in the US are different from 2009, which does not have a subprime lending crisis, China’s 300 percent-to-GDP debt load is worrisome. 

Maybe this time round we will see a second Asian Financial Crisis like in the late '90s, only much bigger because China and this region are far more important to the global economy than they were 20 years ago. 

Wall Street Valuations Too High

On the other hand, a US stock market that became more overstretched comparing market capitalization to GDP - which peaked last October above 180 percent - than in the Great Crash of 1929 likely has a lot more downside than the current correction. Warren Buffett always gives this as his favorite yardstick for overvaluation, did he forget about it this year?

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Ahmad Kamal 1 year ago Member's comment


Harry Goldstein 1 year ago Member's comment

What about gold? I take it you are a fan?

Peter Cooper 1 year ago Author's comment

I see Sam Zell has just bought gold for the first time ever. Now there is an opportunist worth following!

Alexis Renault 1 year ago Member's comment

Who is Sam Zell?

Peter Cooper 1 year ago Author's comment

US billionaire investor

Alexis Renault 1 year ago Member's comment

Thanks, you learn something new everyday!

Kurt Benson 1 year ago Member's comment

I certainly agree that $GS was a tad pessimistic. I mean come on, with all the uncertainty in just about everything right now, the only thing that is certain is that #gold is here to stay!

Michele Grant 1 year ago Member's comment

I'll never understand how so many people got caught up in the #crpyto craze rather than the proven safety and staying power of #gold.

Alexis Renault 1 year ago Member's comment

How did #Goldman come up with it's number?

Harry Goldstein 1 year ago Member's comment

Good article. Thanks for sharing.

David M. Goldstein 1 year ago Member's comment

I too was surprised that #gold hasn't risen higher. There's been so much craziness lately, sometimes it's nice to back to something nice, safe and reliable - G-O-L-D!