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Goldman Sachs: Buy Gold if it Drops Any Further

Friday, October 7, 2016 5:41
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Gold barsIn a note sent to clients this morning, Goldman Sachs hinted that gold’s recent sell-off may be overdone, and that investors should look to buy if it continues to lag.

Analysts Max Layton, Mikhail Sprogis, and Jeffrey Currie admitted that the yellow metal’s recent pullback has been “larger than we anticipated.” Gold prices have plunged over 9% in the past three months, as investor worries over a December interest rate hike continue to grow.

Any further selling will result in a buying opportunity, however, said the analysts:

“Indeed, we would view a gold selloff substantially below $1,250/oz as a strategic buying opportunity, given substantial downside risks to global growth remain, and given that the market is likely to remain concerned about the ability of monetary policy to respond to any potential shocks to growth.”

Despite rising rates, Goldman believes the combination of gold ETF buying and higher demand for physical gold bars, which have been strong all year, will remain in tact. Chinese demand for gold is another potential catalyst that could keep prices afloat, said the firm.

Goldman Sachs has a $1,280 year-end price target on gold, which equates to about a 1.8% upside from current levels.


The SPDR Gold Trust ETF (NYSE:GLD) rose slightly in premarket trading Friday to $119.70. Year-to-date, GLD has still gained 17.94%, but is off nearly 9% from its yearly highs amid the recent pullback.

The GLD fell for a record-tying ninth day in a row yesterday.

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