New York gold futures recouped initial heavy losses but still traded lower on falling energy prices on Wednesday, as Goldman Sachs raised its gold price targets and the dollar gave back some early strength.
"Goldman raised its price forecast, and I think that's actually helping a bit here. Basically, the fundamentals still point to gold, there is no reason why you shouldn't be in it," said Neal Greenberg, trader with RBC Proprietary Trading at Red Bank, New Jersey.
At 10:33 am EST (1533 GMT), the most-active gold contract for February delivery at the Comex division of the New York Mercantile Exchange was down $15.60 or 1.7 percent at $887.00 an ounce. It hit a high of $901.00. In overnight trade, heavy profit taking sent gold prices to their one-week low of $878.50, extending its previous session's weakness. On Tuesday, gold futures finished a tad lower as they failed to rise above record high at $916.10, triggering chart-based selling.
Meanwhile, Goldman Sachs raised its 2008 gold price forecast, factoring in an expected US recession in the second and third quarters of the year that would lead to a weaker US dollar.
The brokerage raised its 2008 price forecast to $915 per ounce, compared with its previous view of $800. Goldman expects prices to range about $850 at the end of the year as the US economy recovers.
Gold is often viewed as an alternative to holding the dollar, and thus the value of gold usually rises when the US dollar falls. Spot gold was quoted at $888.50/889.20 an ounce, down from Tuesday's New York close of $899.50/900.20. London bullion dealers fixed the afternoon spot reference price at $889.75.
Comex March silver was down 20.5 cents or 1.3 percent to $16.095 an ounce, trading from $15.770 to $16.250. Spot silver was at $15.98/16.03, down from $16.10/16.15 late Tuesday. London silver was fixed at $15.85. April platinum was down $22.90 or 1.4 percent to $1,562.60. Spot platinum was quoted at $1,557/$1,562. March palladium dropped $3.75 to $380.75 an ounce and spot palladium was at $375.50/$380.50.
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