Pros Slam Goldman Sachs' Bearish Call On Gold
The price of gold slipped to a one-month low below $1,700 an ounce on Wednesday as a weaker price forecast by Goldman Sachs triggered some fund liquidation, but some professional traders think the precious metal could continue to push higher.
Goldman Sachs cut its 2013 gold outlook and said the metal's current bull cycle will likely turn next year as rising real interest rates and better growth offset monetary stimulus from the Federal Reserve.
"… Improving U.S. growth outlook will outweigh further Fed balance sheet expansion and the cycle in gold prices will likely turn in 2013," the New York-based investment bank wrote in a note to clients.
Goldman cut its 3-month price target on gold from $1,840 to $1,825 an ounce while its 6-month target dropped from $1,940 to $1,825 an ounce, and its 12-month target fell from $1,940 to $1,800 an ounce.
Speaking on CNBC's "Fast Money Halftime Report," futures trader Anthony Grisanti said that while he doesn't necessarily agree with all of Goldman's price targets for gold, he does think $1,800 an ounce is "definitely a possibility." As it currently stands, though, he expects gold to find support between $1,672 and $1,675 an ounce. If gold drops below that level, Grisanti thinks support will fall to the $1,600 level with resistance at $1,755 an ounce.
"I think with QE still going on next year and no call for it to end, gold will go higher," said Grisanti, founder and president of GRZ Energy and a "Futures Now" trader.
Rich Ilczyszyn, founder and chief market strategist at iiTrader, agreed it's just too early to call the top in gold.
"We still have all kinds of geopolitical risk. Because we're talking "fiscal cliff" here in the United States, we're forgetting about the weak economy in the U.K.," said Ilczyszyn of "Futures Now," referring to how American investors are worried about whether lawmakers can make a budget deal to avert the "fiscal cliff'' — automatic spending cuts and tax hikes that analysts say could stoke a recession. "Obviously, 2013 will be full of surprises as 2012 and 2011 were."
By judging the flows into gold, Ilczyszyn said it doesn't appear gold has topped out. From India to South Korea and China, many central banks around the world continue to buy many tons of gold, Ilczyszyn said. Meanwhile, he noted investors continue to shovel billions of dollars into gold exchange-traded products. ETPs, an easy route into commodities for investors, include exchange-traded funds, exchange-traded commodities and exchange-traded notes. All trade on a stock exchange and their value is linked to the underlying assets.
"So when I start watching flows, if we start reducing those levels, then maybe the top is in. I still think we still have a good shot to the upside, though," Ilczyszyn said, adding the U.S. dollar is trading near its lows, which is significant because a weak dollar is generally a bullish sign for gold. "The dollar is a great barometer against gold, so I'll be keeping an eye on the dollar, as well."
—Reuters contributed to this report