CNBC
Published: Wednesday, 28 Mar 2012 | 7:06 AM ET
By: Catherine Boyle and Madeline Laskoski
CNBC.com
The price of gold, one of the most eagerly watched indicators of market confidence, is currently “too low” relative to real interest rates, according to commodities analysts at Goldman Sachs
The analysts forecast that gold [XAU= 1658.39 
-21.65 (-1.29%) 
]will rise to $1,785 per ounce over the next 3 months, $1,840 over the next 6, and $1,940 over the next year.
“At current price levels gold remains a compelling trade but not a long-term investment,” they wrote in a note.
They argue that U.S. real interest rates are the most important driver of the price of gold in dollars – but that this relationship broke down late last year and has not yet returned to the level current negative or low yields on 10-year Treasurys imply. The low yields have come following the Federal Reserve’s Operation Twist – which involved the central bank buying up longer-term Treasurys and selling shorter-term Treasurys and helped restore the markets’ confidence in the U.S.
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