1. As detailed in US Views: Stepping Back, published May 8, 2016, our US economists recently reduced their forecast for Fed funds rate hikes over the next 12 months from 100 bp to 50 bp. Corresponding with this, our global rates team has lowered its forecast profile for 10-year US real rates over the same period (see Macro rates views: Lower Rate Forecasts, But Reflation Theme Intact, published May 10). As a result, we reduce the downside to our gold price forecast, raising the 3/6/12 month forecast profile to $1,200/1,180/1,150/oz from $1,100/1,050/1,000/oz. Our new year average price forecasts for 2016/17/18 are $1,202/1,150/1,150/oz from $1,124/1,000/1,050/oz. Though we forecast that gold prices will decline from spot over the next 3-12 months (with c.5%-9% downside), for reasons which we detail below, the changes to our economists' rates forecasts act to reduce the degree of downside to our modelled gold price profile and thus change the risk-reward of our previously implemented short gold trade recommendation (published February 15), which we close as a result at a c.4.5% loss.
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This received from A. Reader this morning, is the header of today's Goldman Sachs note to clients that announces they're closing their short position at a loss. Oh, doesn't that make me feel sad...