Goldman Sachs: Gold Going to $1,650

By Liam Pleven

Gold at $1,400 per troy ounce? Not such a bold prediction these days, with gold hovering around $1,350.

Well, how about $1,500? That’s starting to sound a little bullish.

Could it even reach $1,600 next year?

Ifthat seems like the kind of figure a feverish goldbug mightthrowaround, consider this: Goldman Sachs just raised its 12-monthforecastto $1,650.

In raising its sights for gold, the Wall Streetgiant cited therecent rally and persistently low interest rates in theU.S., as well asthe potential impact if the Federal Reserve intervenesfurther to propup the economy.

More so-called quantitative easing would be a “strong catalyst todrive gold prices higher,” concluded the analyst, David Greely.

Noone knows for sure what the Fed will do, or when, but hopes havebeenrising since the Fed expressed concern in September that inflationwasactually too low. Gold, of course, if often seen as a hedgeagainstinflation running out of control, which suggests the rally may bedrivenby a general lack of faith the Fed will be able to calibrateanyintervention with precision.

Goldman Sachs’ prior 12-monthforecast for the gold price was $1,365 -only about $12 higher thangold’s settlement price on Monday, the daythe bank issued the report.But the higher prediction came with acaveat, that gold prices could getpushed down when the U.S. economystrengthens and the Fed startstightening monetary policy.

And what are the chances of that happening soon?

“Asdiscussed by our U.S. economists, models suggest that it might infacttake until 2015 or longer before a rate hike became appropriate,”Mr.Greely wrote, though he added that the bank’s economists “emphasizethatthis is a scenario, not a formal forecast.”