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Goldman Sachs Says It’s Time to Short Gold

February 16, 2016, 7:41 PM UTC
Gold, gold bullions.
GERMANY, MUNICH - NOVEMBER 25: One 12,5 kg Gold bullion and 1 kg gold bullions in the strong room of pro aurum goldhouse in Munich. (Photo by Ulrich Baumgarten via Getty Images)
Photograph by Ulrich Baumgarten — Getty Images

During a stressful week navigating volatile markets, many investors turned to the popular long-term investment of gold, pushing up prices 7.1% last week toward $1300 per ounce.

That was gold’s best one-week gain since the 2008 financial crisis.

But its time to sell the commodity, wrote a group of Goldman Sachs analysts lead by Global Head of Commodities Jeffrey Currie in a Tuesday note.

Gold is known as measure of investor sentiment. Investors generally see it as a “safe haven” in times of economic uncertainty, since its price stays relatively steady in the long-term.

But the fears pushing up gold prices has no real basis, analysts wrote. The U.S. is relatively buffered against any spillover from the slowing China economy, while the low oil prices are unlikely to be long-term. Meanwhile, banks have enough liquidity to handle a riskier environment.

“We believe that these fears ignore the facts that systemic risks from oil, China and negative rates are very unlikely,” the analysts wrote. “Financial markets have overreacted to the point that current inflation breakevens would require oil prices to keep declining for the next 7 years.”


“We maintain our view of rising U.S. rates and hence lower gold prices, with a 3-month target of $1,100 per once and 12-month target of $1,000 per ounce,” they wrote.

Oil prices surged overnight after several of the largest oil-producing countries agreed to cut production, driving hopes that the global oil glut might finally see a long-term solution.

Gold was trading at $1,204.20 per ounce as of 2:14 p.m. EST.