Goldman Sachs is RAISING ITS 2008 GOLD FORECASTS factoring for a recession in the U.S. in both Q2 and Q3 2008, leading to a weaker U.S. Dollar target of $1.51/Euro (up from $1.35) over the next six months.  The prior $800/ounce gold target is now put at an average of $915/ounce for all of 2008, with an exit 2008 commodity price of $850 (up from $825 prior).  The call is based on support from investment demand, purchases from emerging market central banks, and the ongoing declining mine supplies.  Goldman Sachs is also raising its 2009 and 2010 gold prices:

• 2009 prices are now expected to be $870/ounce (up from $852);
• 2010 prices are now expected to be $940/ounce (up from $907);

Near-term Goldman Sachs notes a possibility of a spike past $1,000.00 that could be the effect of further credit events and increases in oil prices.

Below is a summary of some of the equity calls from Goldman Sachs on its gold stock sector coverage:

• Barrick Gold (NYSE: ABX) is Goldman Sachs’ TOP PICK as a defensive and non consumer-sensitive pick within its basic materials coverage.  Its estimates were only raised 1 penny to $2.01 EPS this year but next year’s EPS is now targeted at $4.00 (up from $3.20 prior).  This was recently also Jim Cramer’s top gold pick.
• Newmont Mining Corp. (NYSE: NEM) (neutral rated) estimates were raised from $1.31 EPS to $1.33 and next year from $1.94 to $2.76.
• The new estimates for AngloGold Ashanti Ltd. (NYSE: AU) (neutral rated) are $1.61 EPS from $1.57 for this year and $3.38 from $3.16 for next year.
• Compania de Minas Buenaventura SA (NYSE: BVN) ADR’s (sell rated) are seeing this year’s EPS estimates raised to $2.54 from $2.50 and next year’s EPS estimates raised to $4.43 from $3.55.
• Gold Fields Ltd. (NYSE: GFI) (Buy rated) estimates are being raised to $0.87 EPS from $0.69 this year and raised to $1.54 EPS from $1.39 next year.
• Freeport-McMoRan Copper & Gold (NYSE: FCX) (Buy rated) is seeing the estimate for this year down by 1 penny to $8.49, but the EPS estimate for next year is being raised to $10.03 from $9.75.

Traders can also look at the streetTRACKS Gold Shares (NYSE: GLD) as the ETN (ETF) in the sector.  It trades at roughly one-tenth the price of gold bullion after trust expenses and fees.

Many traders thought that first $100 OIL super-spike price wasridiculous at the time, but then as prices soared and all of a suddenthe hiked and raised $135 OIL super-spike price didn’t get as muchcriticism.  For inflation’s sake, let’s hope Goldman Sachs proprietarytraders don’t go out on a massive buying spree.

Jon C. Ogg
January 16, 2008

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