Goldman Sachs is sticking to its average forecast of $1,413 for an ounce of gold this year as it does not see sharp reductions in U.S. Federal Reserve stimulus, after fears of such cuts drove bullion prices to near three-year lows recently.
In a note issued on Wednesday, Goldman said it also expected gold to average $1,165 an ounce in 2014 as previously forecast, although the price could reach $1,050 by the year-end.
The spot price of gold traded around $1,319 at 3:40 pm. EDT (1940 GMT). The market is down 20 percent on the year after a selloff last month sparked by Fed Chairman Ben Bernanke's announcement of plans to curtail the central bank's monthly bond purchases of $85 billion. The Fed stimulus has fueled much of the highs in gold prices since 2010.
While gold has rebounded from a near three-year low of $1,180.71 hit on June 28 after Bernanke assured that any stimulus tapering would not be disruptive, many see the market dropping further down the road.
Goldman said it expected gold to actually trade lower at times than the averages forecast for this year and 2014.
"Specifically, we expect gold prices to trade around $1,300 until year-end given our economists' expectation for lackluster growth near term," Goldman said.
But the market's downside was also expected to be muted by the Fed's renewed position on stimulus cutbacks, it said.
"Recent communication by Fed officials has emphasized that the overall level of monetary accommodation will not be reduced significantly," Goldman said.
Goldman said its "least preferred commodities" in the next 12-month period were copper and iron ore. Its most preferred, relative to spot prices, included lead, zinc, palladium and hard coking coal.
The outlook for copper and iron ore came as came as top metals buyer China continued to report data indicating a slowdown in its massive manufacturing sector.
"I think they (Goldman) are correct in saying that we probably will see weaker supply demand equation for the base metals than might have been thought previously," said Bill O'Neill, partner of New Jersey-based commodities investment firm LOGIC Advisors.
"Clearly, we have markets like aluminum, which is in oversupply."
Goldman cut its forecast for aluminium to $1,866 a tonne this year from $2,050. For 2014, the forecast was reduced to $1,950 from a previous estimate of $2,050.
Its projection for nickel dropped to $14,821 a tonne in 2013, from $16,625. For next year, the forecast was revised to $14,750 from $17,000.
Goldman's platinum price forecast for 2013 fell to $1,483 an ounce from $1,575. For next year, it anticipated the price at $1,463, versus an earlier estimate for $1,600.
In palladium, the outlook fell to $743 an ounce this year from $781. For 2014, Goldman forecast $795 an ounce, down from $925 an ounce previously.
With lead, the Wall Street bank dropped its forecast to $2,098 a tonne from a previous $2,163. For 2014, its estimate fell to $2,225 from $2,338.
In zinc, Goldman cut its forecast to $1,900 a tonne from $2,103 a tonne. For next year, its expectation was for $2,050 a tonne versus a previous $2,175 a tonne.