Gold Prices to Hit $1,480: Goldman

Alix Steel

NEW YORK (TheStreet ) -- Goldman Sachs(GS ) is bullish on gold prices, at least, for now.

The investment bank said in a research report Thursday that it expects gold to rally "towards our 3-month price target of $1,480" an ounce. Goldman is recommending investors get long on gold by buying the December 2011 futures contract currently trading at $1,426.10 an ounce.

Goldman believes that gold makes a good investment with U.S. real interest rates negative, the interest rate minus the inflation rate. Currently the real interest rate is negative 1.1%.

The caveat? This golden situation won't last. Goldman expects U.S. rates to recover as the second round of quantitative easing ends in June and as the U.S. economy continues to strengthen. As a result, Goldman believes gold prices will peak in 2012.

"Gold at current price levels is a compelling trade, not a long term investment," the report said. Goldman also warns gold producers to "begin scaled up hedging of forward production," despite the fact that most major producers like AngloGold Ashanti(AU), Barrick Gold(ABX) and Kinross Gold(KGC) raced to de-hedge over the past two years.