Goldman Sachs Pushes Gold Hedging

Goldman Sachs is suggesting that mining companies sell gold forward again. Although the bank reckons the gold price will increase to $1,355/oz. over the next 12 months—tiny increase from earlier prediction of $1,335—beyond that it is looking for prices to stabilize and fall as the U.S. Fed tightens monetary policy and the recession is seen to be ending.

Of course the big gold banks, of which Goldman is probably the most successful, can do very well out of its clients hedging their gold forward whatever the fortunes of its clients in so doing. It was notably the bank that reputedly advised Ashanti Goldfields to sell its gold forward at gold's low point back at the end of the 1990s—a policy that brought the gold miner to its knees leading to its takeover by AngloGold—another Goldman client. Indeed commentators have suggested that Goldman made profits on every angle of the Ashanti hedging debacle—and on the sale of one of its clients to another.

However, the fact that Goldman is still looking for an increase in the gold price, even if only over the next 12 months, is positive for gold. The bank actually forecast a six-month gold price (effectively a year-end figure) gold price of $1,290 rising to the $1,355 figure over the following six months. With predictions being regularly updated (the latest figure is an update from Goldman's previous one of only three weeks earlier), the position may again change depending on how quickly the global economy is seen as recovering.

Goldman also delivered forecasts for base metals and silver, all of which ranged higher than previous ones apart from zinc where the bank was looking or an 18% fall.