Gold price drops to 5-week low. Goldman sees short term sub-$1,000 risk
Gold suffered a second day of selling on Friday dropping $21 to a 5-week low of $1,310 an ounce over rising fears about US economic stimulus.
Waning concerns over the US entering the conflict in Syria and demand from Asia appearing less robust than previously thought also weighed on sentiment.
The gold price seemed to have turned a corner in August, briefly exiting a bear market as it fought back from near 3-year lows.
But this week's more than 5% drop is the worst performance since the end-June plunge to below $1,200.
The US Federal Reserve meeting ends Wednesday next week and consensus is that the Chairman Ben Bernanke will announce a relatively modest $10 billion reduction in the bank's asset purchases program currently running at $85 billion a month.
Jeffrey Currie, the head of commodities research at Goldman Sachs tells Bloomberg Television that the Fed's tapering has already been priced in by the gold market, but that continued better economic performance by the US is the biggest risk to the price of the metal.
Currie then adds that gold's fair value in terms of cost structure is around the $1,200 mark, but that's rapidly shifting lower along with emerging market currencies, particularly the South African rand.
Currie sees weakness for the rest of the year and going into 2014 with the investment bank predicting a fall to $1,050 an ounce.
There is also a risk that gold could overshoot on the downside in the short term and Currie believes gold could "clearly trade below $1,000."