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Goldman Again Buying Gold, Selling Copper As It Lowers Gold Price Forecast, Boosts Copper
First, Goldman royally raped its clients by losing them a boatload in two sequentially failed EURUSD recommendations (on which the firm, of course, being on the other side of the trade, ended up making a killing). Today the firm is handing out vaseline to clients but not in FX - they are now going after commodities and, specifically, gold. Most relevantly, Goldman is once again starting to accumulate Gold. Three months ago Goldman boosted its forecast price target to $1265/toz in 2010 and $1425/toz in 2011, during which period the firms was likely shorting gold to clients who were buying in expectation of a price hike. Today Goldman has revised its call - no surprise: gold is now expected to drop to $1165 in 2010 and $1350 in 2011. Then again, according to former Goldmanite and current gold "expert" Jeff Christian big banks would never do something as risky and foolish as having a naked short position. So please ignore anything we might have said earlier about GS shorting gold unhedged. Bottom line, clients are now expected to sell their gold to Goldman. Which means Goldman is buying. You do the math.
From the report:
Broadening economic recovery raising US real rates, leading us to lower our gold forecast to $1165/toz in 2010 and $1350/toz in 2011 While we continue to expect gold prices to move higher this year, higher US real rates off the back of stronger economic activity will likely reduce some of that upside. Consequently, we are lowering our 2010 gold price forecast to $1165/toz. However, our US growth, inflation and rate policy outlooks suggest real interest rates will likely fall again later in the year. Consequently, we expect gold prices to rise to $1155/toz, $1220/toz, and $1320/toz on a 3, 6, and 12 month horizon, and average $1350/toz in 2011.
One wonders if the Goldman commodities team conferred with Jan Hatzius who see the 10 Year at 3.25% in "corroboration" of this "higher US real rates" call. Oh well, gotta make money in every way imaginable, even if it contradicts everything else the firm says.
Here is a table of Goldman's most recent forecast for various commodity classes:
This is how this table looked like in December 2009:
Some more details from the report:
Precious Metals
Hedging Recommendations
Consumers: We expect gold prices to continue to rise from current levels as we expect real interest rates to remain low on a continuation of accommodative US monetary policy. The recent rise in US real rates, however, suggests that the upside for prices is more limited than we previously anticipated, and we continue to see considerable downside risk, should the US Federal Reserve tighten monetary policy earlier than expected. Consequently, we would recommend near-dated consumer hedges in gold, but more so in platinum where recovering global automobile demand will likely continue to put upward pressure on auto catalyst demand and therefore on platinum and palladium prices.
Producers: While we expect gold prices to increase in 2010 and 2011, the rising risk of declining gold prices once the US Federal Reserve begins tightening monetary policy suggests this is a good time for gold producers to begin scaled up hedging of forward
production, particularly for calendar 2011 and beyond.
And:
Precious Metals: +0.2% from February 28, 2010 through March 31, 2010; +1.7% ytd through March 31, 2010
While continued signs of a broadening economic recovery have provided strong support to energy and industrial metals prices, they have also fueled a rally in US real rates which has kept COMEX gold prices under pressure, well off 2009 highs (see Exhibit 24). Although we continue to expect gold prices to move higher this year, we expect that the higher US real rates will reduce some of the upside to prices, leading us to lower our 2010 COMEX gold price forecast to $1165/toz. However, our growth, inflation and rate policy outlooks suggest real interest rates will likely fall again later this year. Consequently, we expect COMEX gold prices to rise to $1350/toz in 2011. With our new COMEX gold price forecasts of $1155/toz, $1220/toz, and $1320/toz on a 3, 6, and 12 month horizon, respectively, we have lowered our 12-month precious metals excess returns forecast to 17%.
When we last revised our COMEX gold price forecast in December, we expected that the yield on 10-year US TIPS would remain close to 1.00% on a slow US economic recovery, low inflation and a Fed fund rate target near zero through 2011. Over the past few months, the steady increase in long-term real rates, however, has been suggesting downside risk to our gold price forecast with a sustained 10-year US TIPS move from a 1.00% to 1.50% yield implying a medium-term gold price of $1,186/toz, all else constant (Exhibit 25 and 26).
The key driver behind this move in long-term US real rates has been a re-pricing of stronger growth in the United States while inflation remains well behaved. On the back of stronger economic activity and recognizing that in the light of high borrowing requirements the market may remain concerned about the potential impact on yields of the termination of the Fed’s asset purchases, our fixed income analysts have raised their US 10-year yield forecast from 3.0% to 3.5%. Consequently, we now expect a higher real rate picture for 2010 than we did at the start of the year and as a result are lowering our 2010 COMEX gold price forecast to $1165/toz.However, our outlook for US growth, inflation, and policy rates suggests that real interest rates will likely fall again later this year, and we therefore expect COMEX gold prices to rise further to $1350/toz in 2011. The two key drivers of this real rate outlook reside in our US economists’ strong conviction that inflation will remain low and the short-term rates will remain near zero. Specifically, most measures of underlying inflation in the US have been very soft in recent months, and given the size of the output/employment gap, they expect that year-on-year core PCE inflation will fall below 1%. Second, our GS Global ECS Research team continues to believe that the Fed’s dual mandate of maintaining both price stability and full employment will lead it to keep short-term rates near zero through 2010 and, more likely than not, 2011 as well.
While the FOMC minutes support our rate forecast, as highlighted by the broad support to retain the “extended period” language on interest rates, we continue to expect that gold prices will come under significant downward pressure once the US economic recovery strengthens and the US Federal Reserve begins to raise interest rates. In particular, an earlier-than-expected tightening of US monetary policy is the main downside risk to gold prices, in our view.
While gold prices have remained range bound in 2010, platinum prices have continued to outperform in March on the back of the broadening economic recovery and continued steady investor flows into platinum ETFs. While we are lowering our gold forecast, we remain constructive on platinum prices as the bulk of demand is industrial and poised to benefit, like copper and oil, from the broadening economic recovery. In particular, auto sector demand, which accounts for close to half of all platinum demand via autocatalysts, continues to improve steadily with US March auto sales at a new post “cash-for-clunkers” high and Chinese vehicle sales remaining near record highs. As the platinum balance continues to tighten on the combined effects of higher car sales and increasing ETF holdings, which are closing on 1 million toz, we expect the platinum to gold ratio to continue to recover to its pre-crisis levels, supporting further gains in platinum prices (Exhibit 27). We first recommended a long NYMEX Platinum position in July 2009, and with expiration approaching and the trade posting a $579/toz gain, we recommend rolling this trade out to July 2010, with a current entry level of $1727.4/toz.
Goldman also has strong words of encouragement about the other commodities it is permanently axed seller in: oil, copper, etc.
Full report below.
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It amazes me that people still do business with Goldman?
That's what I was thinking...
It still amazes me that People watch Jim Cramer.
I laugh at Cramer, does that count?
It still amazes me that people read analysts' reports
squid bitches
I know this happens all the time, but one would think that recommending a trade and playing the other side of the same trade would be a slam-dunk lawsuit.
Has anyone ever sued for this?
They have....only to be never heard from again.
All died in car accidents on holiday in the carribean or drug overdose in massage parlours in SE Asia, holidays all courtesy of The Great Sea Monster Inc.
Thank you Zerohedge! We could not do it without you.
Goldman, a one-stop crime wave.
Ah, the dilemma - The Prince of the Vampire Squid, Wolfram & Hart, I mean Goldman Sachs is in a buying mood when it comes to shiny, yellow colored PMs. So, do I want to be selling? Or buying?
Like was said in the story, "You do the math."
Where is Wesley Wyndham-Pryce when we need him?!
So Goldman is accumulating Gold, Colt .45 ,9mm Beretta 92F ... they are just missing water filters and dehydrated food
why the heck does GS wastes so mcuh paper and bandwidth on those useless explanations and forecast charts 10 years in the future (when they change forecast weekly!)
All they have to do is "buy", "buy buy buy", or "sell sell sell" - that's all that those who follow GS advice really need.
math the goldman way
5+5= 4.. for you 5+5= = 20 for us.
No no no...money cannot be created or destroyed, or was that "matter" wait money doesnt matter to the Fed... hmmm so you didnt mean 5+5 = 4 for you and 6 for us (of your original 10) so the 4 for you was 6 times leveraged by the Fed, meaning you still only get 4 but GS gets 20? Hmm was that the velocity of money (GS money) v the de-velocity of money (US money)?
This is the high water mark crayon Goldman is painting on the wall....They are letting the water out of the bottom of the tanks so sell to us now..... Keep yer powder dry...better priced days ahead...
I have met these people, these are the same Vamp Squids who said WTI was going to 200 at 145 and were liquidating there futures hedges on total return swaps they sold to pension funds as they released the uber bullish forecast. Mind you liquidating a swap hedge on a total return swap you sold is the equivalent of going short bilaterally against your client.
And of course, it would be in their interest to artificially suppress gold prices at this juncture.
"You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for,that my dear friend, is about the end of any nation.
You cannot multiply or create wealth by dividing it."
Dr. Adrian Rogers, 1931
There is no rebuttal to this quote that would make as much sense as it does.
As is there is no rebuttal to those who want Obamacare WITHOUT demanding that TheBamster, Harry Reid, the Dead Kennedys, Nancy Pelosi and her other apostles agree to be covered under Obamacare, too.
None.
Find another forum to rave on wingnut. You have nothing of value to contribute.
WTF? What he's saying is valid. Why can't you face up to reality honorably?
I am Chumbawamba.
This is how you grill squid: Let's say you work as a PM at a large public pension fund. Goldman is covering you, you pick up, they make their recommendation, you say "great, put me down for a yard." You then immediately call several other brokers and take the opposite side of the trade using smaller amounts but in total, they're twice or three times the initial trade you did with Goldman. Works like a charm, you'll always make money. Of course, you can just ignore them altogether and just do the opposite each & every time, but sometimes they make the right call to throw you off.
The Goldman "mystique" is still there. People still talk about the Goldman Sachs "pedigree". WTF does that mean? Their shit doesn't stink? Investors should treat all brokers equally, and stop falling in love with any of them!
It's amazing. I've never been long an asset that I have wanted to see fall in value so badly. I never thought I'd say this but I hope Goldman is right. I'm not done accumulating yet.
For all the haters, is gold really a bubble if most people who own it think it will/want it to fall in value in the near-term? I'm pretty sure that's called rationality.
I have already flogged myself for thinking the same thing. Please JPM/GS, go ahead, do your worst, because all it means is I get to buy more.
What Goldman does is irrelevant. They can try to turn down the boiler or open up all the valves or break the dials to prevent you from seeing the pressure building but, oh, it's building. And the explosion is going to take out everyone who isn't protected by a coat of gold armor. However, if Goldman thinks having all the gold will protect them, they're going to be pretty sore assholes when the zombie hoards catch up to them.
I am Chumbawamba.
Could Goldman be right this time?
Well, well, well. No WONDER gold is down today - they are pushing it down a ways, so they can buy.
Will wonders never cease.
They've probably also got a lot of short contracts they need to get into the money.
Making money on both sides of the trade, it's what they do best.
+ for the "short" statement.
+ for the "both sides of the trade" statement.
I am not touching Platinum at these prices , I was looking at some Platinum maple leafs for some diversification of my pm holdings but now I have come to the conclusion that prices will tank when the Chinese realise that there population cannot sustain a large car inventory.
Any Goldbug that wants to also accumulate physical platinum for the long term must also believe that peak oil is many years away.
There is no logic to hold a metal whose price relationship is so deeply symbiotic with the car industry when you hold the view that peak oil has arrived.
And yet, platinum was still worth more than gold for well over a century before automotive catalytic converters were ever even conceived. What sustained its price premium in those bad old, pre-1970s days?
Akak - its rarity and beauty I guess
Sure I would buy it at 1250 but I think it is too hot now - that being said it could be becoming more of a monetary asset now and therefore I could have miscalculated
But I will keep some of my powder dry.
always with the Maple Leafs.. why not go long syrup??
I may have a unconscious desire for her majesty but then again when I think of the Queen Helen Mirren always comes to mind.
www.youtube.com/watch?v=cosG57WdmnY
Must be that high Face Value in solid Canuckian dollars vs. the Eagle.....
If you combine "peak gold" with rising demand and a falling US Dollar one might be bullish of gold.
Silver is weird. It's not nearly as rare as gold, but it's still a shiny historical store of wealth. But what's odd is that people don't accumulate the physical because it is so cheap (thanks JPM). In other words, if you have a few million or hundred million to convert you need a big old vault for the silver.
Wasn't always this way. I'm diversifying away from gold into silver and palladium and platinum. People are even loading up on copper ingots.
Uh, Karma -
You might want to check your numbers before talking about silver versus gold, and their relative rarities. Particularly since silver is an industrial metal, and is "used up" in wayswhich lock it into forms which require substantial cost to recover it from.
The available silver inventories are at all-time, unheard-of, record lows. The creation of silver eagles alone, in the US, will utilize approximately ONE HUNDRED PERCENT OF US SILVER PRODUCTION this year. Meaning.....all industrial metal will have to be imported.
Silver is the place to be. Accumulate the physical. A reasonably sized safe (4 x 2 x 2) can hold a couple million dollars worth at todays prices.
If you have more than that, let me know. I'll buy another safe.
Actually, a 4X2X2 safe will hole $2.957MM in silver at today's closing price.
A 4X2X2 safe is 16 cubic feet, or 27,648 cubic inches. An Englehard 100oz silver bar is 5.75"X3"X1" or 17.25 cubic inches. Therefore, one could store approx. 1602 bars in that safe, or 160,278 ounces. Multiply by $18.45 and you get almost $3 mil.
I had some free time on my hands...
Better put it on the ground floor. 5 tons.
Yeah... In China.
So everybody make sure to sell your paper gold to Goldman Sachs.
I'll sell them some lead. Free delivery. Fast, too.
I am Chumbawamba.
What bumble bee said.
Everyone is hungry for what they believe are things with real value, so sell them paper when the paper to be sold is cheap to you and expensive to them, so when the time comes to redeem they realize they have none of the underlying and you have several vaults of the stuff which they then realize and shoot you to obtain.
come on debt jubilee!!! someone has to knock over this game of monopoly soon!!!
I was wondering if that were the only good thing that could come from a total collapse - the do over.
Goldman is simply exploiting the counterintuitive but undeniable fact that some individuals want to be hurt. (Or want the persons on behalf of whom they are managing money to be hurt). That this genus of pathology is a modern day constant is reflected in Goldman's continuing fortunes. Goldman feeds on society's sores. That way, they'll never go hungry.
Amazes me that Goldman Sachs the crooks and criminals are going about their daily crooked work without so much an an enquiry by the Govt.
Which goes to show that Goldman Sachs is the Govt!!
And what amazes me even more is that the other Govts in the world are keeping their mouths shut!!