Gold and Silver Shake Off Downgrade from Goldman Sachs

Wall St. Cheat Sheet

On Wednesday, gold (NYSEARCA:GLD) futures for February delivery, the most active contract, decreased $2.00 to settle at $1,693.80 per ounce, while silver (NYSEARCA:SLV) futures for March climbed 15 cents higher to close at $32.96.

Gold edged only slightly lower as Goldman Sachs (NYSE:GS) downgraded its outlook for gold prices, citing stronger U.S. growth in the second half of next year. The investment firm explains in a client note, “Medium term however, the gold outlook is caught between the opposing forces of more Fed easing and a gradual increase in U.S. real rates on better U.S. economic growth. Our expanded modeling suggests that the improving U.S. growth outlook will outweigh further Fed balance sheet expansion and that the cycle in gold prices will likely turn in 2013.”

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Goldman lowered its gold price targets over the next 3, 6 and 12 months to $1,825, $1,805 and $1,800 per ounce, respectively. It also introduced a $1,750 per ounce 2014 forecast. However, the Bank of Korea, which has been a buyer of gold this year, shined some light on the situation, stating, “Gold is a physical, safe asset. It is a way of diversification, which helps reduce investment risk in terms of foreign-exchange reserves management, according to GoldCore.

In afternoon trading, the SPDR Gold Trust (NYSEARCA:GLD) and iShares Silver Trust (NYSEARCA:SLV) both slipped about 0.20 percent. Gold miners (NYSEARCA:GDX) such as Barrick Gold (NYSE:ABX) and Yamana Gold (NYSE:AUY) dropped 1.7 percent and 2.4 percent, respectively. Silver names such as First Majestic Silver (NYSE:AG) and Silver Wheaton (NYSE:SLW) both fell more than 2.0 percent.

Shares of Freeport-McMoRan Copper & Gold (NYSE:FCX) suffered their biggest loss in four years, dropped 16.0 percent. After months of negotiations behind closed-doors, Freeport announced on Wednesday that it agreed to purchase Plains Exploration & Production (NYSE:PXP) for approximately $6.9 billion in cash and stock, while also buying McMoRan Exploration (NYSE:MMR) for about $3.4 billion in cash, or $2.1 billion net of 36 percent of McMoRan assets currently owned by Freeport and Plains.

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Disclosure: Long EXK, AG, HL, PHYS