While up 11% in 2014, gold experienced its biggest weekly price drop since September, 2013, this week settling near $1,331.20 an ounce.  For its part Goldman Sachs reiterated its sell recommendation on the precious metal, issuing a $1,050 price target, saying the factors that led to the rise in value are not sustainable.

GS China Gold Price

Gold Price: Goldman’s three catalysts

Goldman noted three distinct catalysts that have driven the rally: (1) a sharp slowdown in US economic activity which we believe was weather driven, (2) high Chinese credit concerns (3) escalating tensions over Ukraine.

Goldman expects all these factors to taper, sending gold significantly lower.

“While further escalation in tensions could support gold prices, we expect a sequential acceleration in both US and Chinese activity, and hence for gold prices to decline, although it may take several weeks to lift uncertainty around this acceleration,” the investment bank wrote in an investor note. “Importantly, it would require a significant sustained slowdown in US growth for us to revisit our expectation for lower US gold prices over the next two years.”

Goldman thinks gold could fall more than 30% from current levels. “While we see clear catalysts for the recent rally in gold prices, this move has been large relative to US real rates which are a key input into our forecasts and benchmarking of gold prices,” Goldman metals analyst Damien Courvalin wrote to investors. “As a result, we see potential for a meaningful decline in gold prices towards the level implied by 10-year TIPS yields, which our rates strategists expect to rise further this year, and reiterate our year-end $1,050/toz gold price forecast. More broadly, we believe that with tapering of the Fed’s QE, US economic releases are back to being a key driving force behind gold prices.

Chinese and Indian demand “unlikely to surprise to upside

GS India Gold Price

Noting that Indian and Chinese gold demand is “unlikely to surprise to the upside,” Goldman noted two shifts that could reverse in 2014. “India’s potential easing of gold import tariffs will likely remain modest given how much lower gold imports have contributed to its improved trade balance, we expect a gradual unwind of gold backed financing deals.”

The report did note that their projection was “data dependent” and the report left open the possibility for gold to surprise to the upside.