Goldman Sachs also cuts gold price forecast

Strengthening dollar causes gold outlook to dim

by Tom Stundza -- Purchasing, 8/20/2008 1:11:00 PM

Precious metals analysts at Goldman Sachs in New York have reduced their gold price forecast to average $745/ounce over the next three months, bringing the second-half forecast to $810/oz and creating an average annual gold price of $827  In a note to clients, the brokerage’s analysts say the revised forecast is based on a more positive outlook for the U.S. dollar. (Financiers usually pick the dollar or gold for “safe-haven” investments.)

Earlier this week, an more bearish forecast by precious metals analyst John Nadler at the Kitco bullion dealer’s Canadian branch in Montreal put the precious metal bullion's price somewhere between $680 and $730 for the remainder of the year. That outlook would put the 2008 annual average gold price around $800/oz, as opposed to the earlier consensus projection of $924. Manufacturers use gold in electronics and medical applications as well as in jewelry.

“The U.S. dollar has recently begun to show initial signs of strength as the fundamental picture for the dollar has improved substantially in recent weeks, Goldman Sachs reports, adding that “as the dollar is now expected to strengthen…we are lowering our gold price forecast.”