Goldman, UBS take opposite stands on gold after worst week since November (NYSEARCA:GLD)

Analysts at Goldman Sachs and UBS hold divergent views of the path of gold after prices posted their lowest finish in more than six weeks on Friday, as the Federal Reserve looks increasingly likely to raise interest rates in March.

April Comex gold (XAUUSD:CUR) fell 2.5% last week to finish at $1,786.60/oz., the lowest settlement since December 15, while front-month silver (XAGUSD:CUR) fared even worse, sliding 8.3% to $22.301/oz. in its worst week since September.

ETFs: GLD, IAU, NUGT, PHYS, GDX

But Goldman Sachs is keeping the faith on gold, raising its 12-month price forecast to $2,150/oz., up from its previous target of $2,000, and it also recommends buying December 2022 gold futures.

“Our economists forecast a material deceleration in U.S. growth, while the imminent prospect of a new hiking cycle is leading to a risk-off environment across long-duration asset classes,” Goldman analysts say. “For investors looking for a way to hedge their portfolios from risks of a growth-slowdown and falling valuations, we believe a long gold position would be more effective in the current macro environment.”

“As U.S. growth continues to slow in 2022, the market perception of recession probability could increase further, [which] sets gold up for greater investor interest despite rising rates,” the bank says.

But UBS is bearish on gold, saying “the dollar could be strong and this means gold could be weak” in 2022, as it recently introduced a year-end 2022 target of $1,600/oz.

“More persistent inflation than expected, the recent surge in energy prices and stagflation concerns amid weaker activity data are adding to demand for real assets like gold,” UBS has said.

With central banks starting to curb pandemic-related stimulus to fight inflation, gold fell last year in its biggest annual decline since 2015.