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Goldman Flip Flops Once Again: Mocks IEA Impact On Crude Prices, Reiterates 20% Upside In Commodities, Buying Gold

Tyler Durden's picture




 

At this point we refuse to even recall whether Goldman is long or short oil. Probably so does Goldman, whose Brent recos have become the same laughing stock as Tom Stolper's EURUSD "strategic" price targets in 2010. Yet Jeffrey Currie has found a new way of dealing with appearing idiosyncratically idiotic. Instead of focusing on any one product, the firm has just upgraded (or rather, maintained its buy) the entire commodity space wholesale: "Progress in dealing with the Greek budget crisis and better economic data have improved sentiment around cyclical assets in recent days. We continue to expect further increases in commodity returns later this year and into 2012. We maintain our overweight recommendation for commodities on a 3-, 6- and 12-month horizon and our 20% 12-month commodity returns forecast." Um, yeah, this comes less than two weeks since the last flip flopping on the matter: "The International Energy Agency announced today that its member countries have agreed to release 60 million barrels of oil from their emergency stocks over a period of 30 days. The IEA has coordinated this release, only the third in its history, in response to the ongoing loss of Libyan light sweet crude oil production and the impact that the resulting higher crude oil prices are having on the world economy. We estimate that a 60 million barrel release by the end of July has the potential to reduce our 3-month Brent crude oil price target by $10-12/bbl, to $105-107/bbl. 125/bbl." Way to preserve street cred there Jeffrey. Of course, the aforementioned flipflopping does not prevent Goldman from mocking the IEA's ridiculous SPR release decision, as well as reiterating its upside expectation in the metals space, with an emphasis on gold, copper and zinc. As a reminder, if Jeffrey says "buy", run, Forest, run.

From the latest report (not to be confused with the one two weeks from now which will be the same with a minus sign in front of every other word):

Progress in dealing with the Greek budget crisis as well as nascent signs that at least some of the recent economic disappointments owed to temporary disruptions from the Japanese earthquake have substantially improved sentiment around cyclical assets in recent days, pushing key metals in particular above recent ranges. In addition, drags from commodity-specific events have also eased, with the IEA’s unexpected announcement of a coordinated
60 million barrel release of emergency stockpiles to compensate for lost Libyan supplies in particular likely to be less impactful than first appears.

Although we believe that the Greek situation, ongoing tension between the inflation/growth tradeoff in China, and still mixed economic data from several key economies will continue to drive near-term volatility in the commodity markets, we maintain that commodity prices and returns will rise further later this year and into 2012. Underlying this view are Goldman Sachs economists’ expectations for reacceleration in global economic growth during 2H2011 as temporary drags on growth stemming from the Japanese earthquake and the April oil price spike diminish. On net, while growth is expected to slow in 2011 from 2010’s above-trend pace, it is expected to remain substantially positive and generally supportive of rising commodity demand. We expect this demand growth will be sufficient to tighten key commodity markets over the next six to twelve months, particularly for those markets where supply constraints will become binding even on slower economic growth. Accordingly, we reiterate our long trading recommendations for Brent crude oil, UK natural gas, copper, zinc and soybeans.

Although our forecasts suggest upside is greatest on a twelve-month horizon, we note that further improvement in economic data may be sufficient to pull forward substantially positive commodity returns, particularly for those cyclical commodities that are more anticipatory in nature, such as the metals. As a result, we maintain our overweight recommendation for commodities on a 3-, 6- and 12-month horizon and our 20% 12-month total returns forecast for the S&P GSCI® Enhanced Commodity Index.

Oil: IEA release less impactful than first appears

For oil, we emphasize that the impact of the emergency stock release on the global balance is likely to be relatively short-lived and more muted than first seems. As details of the release have begun to be made available, it is now clear that only about two-thirds of the release of 60 million barrels will be through a sale from government-controlled inventories that would otherwise be unavailable to the market. Further, the impact of the release is likely to be substantially more muted as time goes on. On net, while this oil will moderately increase near-term supply availability, it does little to alter inventory levels and the trajectory of crude oil prices over the medium-term. We continue to expect that oil demand growth fueled by moderate economic growth expectations will be sufficient to draw down crude oil inventories and OPEC spare capacity by early next year, leading to considerable oil price upside on a 6- to 12-month horizon. Accordingly, we reiterate our long position in December 2012 Brent crude oil.’

Metals: Upside may be pulled forward

For metals, we also anticipate further upside, especially for the more supply-constrained metals. For copper in particular, we maintain that the winding down of destocking will lead to a stronger Chinese pull on global supply in 2H2011, tightening the market and generating further price upside later this year. We also maintain that zinc price risk is skewed to the upside given our view of developing deficits in 2012, and believe that aluminum prices will continue to be buttressed by our view of higher oil prices over the next year. Given these views, we continue to recommend long positions in June 2012 LME copper and December 2012 LME zinc. We also maintain a long recommendation for December 2011 COMEX gold given our expectations for continued low real rates and moderate increases in monetary buying that will likely remain supportive of the metal in coming months.

Agriculture: We still expect soybeans to outperform

For agriculture, we continue to expect that soybean prices will outperform corn prices and reiterate our long position in November 2011 soybeans. Recent data points reinforce our conviction in these views. Although higher inventories reported across the major crops have eased concerns about the tightness of old and new crop balances, a higher-thanexpected rise in US corn and cotton acreage has resulted in an even larger-than-expected decline in soybean acreage. As a result, we maintain that soybeans will likely achieve a deficit over the next year, leading to a rise in soybean prices from current levels, albeit a smaller rise than we had expected previously given downward revisions to our corn and wheat price forecasts following these reports.

Full report.

Document 1

 

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Wed, 07/06/2011 - 22:57 | 1431596 CAMDEN BEER609
CAMDEN BEER609's picture

1 ounce of Gold = 15 ounces  of Silver = 10 barrels of crude oil.

Keep that in mind and don't worry about the spot

price of paper money.

 

Wed, 07/06/2011 - 23:44 | 1431670 Missiondweller
Missiondweller's picture

+ 10

Wed, 07/06/2011 - 22:56 | 1431597 kito
kito's picture

doing the exact opposite of whatever they recommend at the exact moment they make said recommendation has yielded me a 67 pct return over the past decade.....that even beats my customized jim cramer inverse triple leveraged fund.

Thu, 07/07/2011 - 01:03 | 1431750 Henry_Hill
Henry_Hill's picture

+100

Wed, 07/06/2011 - 23:00 | 1431606 CrashisOptimistic
CrashisOptimistic's picture

How can they not see what is happening to Russian oil production.

It's falling.  Fast.  The decline will overwhelm ANYTHING OPEC can do.

It's like they are driving down a highway and never look up from the speedometer.

Thu, 07/07/2011 - 03:19 | 1431856 Urban Redneck
Urban Redneck's picture

How long ago was it that Russia started kicking out "Western Experts" because they were perfectly capable of finding the oil themselves?  Given the lengthy E&P lifecycle for a new oil well- that period might be suspiciously consistency between the two lengths of time. 

Wed, 07/06/2011 - 23:12 | 1431621 Everyman
Everyman's picture

These fucking assholes either don't have a fucking clue or they are total unabashed liars and do not care about the outcomes other than short term.

I simply cannot really believe the shit that passes for "analysis" out of Goldman Sux or any of the other financail house any more.  I mean SERIOUSLY???  ANOTHER 180????

These fucking pricks need a bullet in their heads,  The are either more stupid than should be allowed to continue to draw breathe, or they are totally corrupt assholes criminals that need to be trteated as the souless dogshit that they are.

I mean GOD DAMN REALLY!!!!!!!!!!!!!!!!???????????????????????/

Wed, 07/06/2011 - 23:14 | 1431629 cityguyusa
cityguyusa's picture

It sure would be nice if I could generate income just by opening my piehole.  These "upgrades" and other market manipulations need to be stopped.  Just today there was a report that identified that almost 90% of the commodity prices are due to day-traders (ie speculators).  This Goldman call just fuels the fire even more.

What reason would Goldman have to make such a prediction...I'm sure they are still trying to recapitalize and recreate their past wealth and as long as they can continue to manipulate markets and investors they will survive.  So they are very in vested in these trends.

Demand for commodities will drive them ever higher as long as there is an increasing population that can "demand" end products.  The question is since the US and Europe are not going to be such large factors on the demand side where will the demand come from?  China, Brazil, India?  It would seem unlikely that they will be able to continue to export their prodcucts and depend on the US and Europe keeping them wealthy as long as the middle class is imploding.

If these emmerging nations continue to pay slave wages they will never develop the internal demand to keep their own economies afloat when the emmerged or wealthier nations no longer have the cash to purchase those products ultimately leading to overdeveloped emmerging economies that end up crashing.

Wed, 07/06/2011 - 23:18 | 1431634 Superslam
Superslam's picture

Short? Long? At this point let's just say that Goldman is shlong oil.

Wed, 07/06/2011 - 23:21 | 1431639 zorba THE GREEK
zorba THE GREEK's picture

 It's just like learning a new language, we recommend 

something means we want to sell something into

strength and a sell recommendation means we

would like to buy something cheap. What we have

 here, is a failure to communicate. 

Wed, 07/06/2011 - 23:27 | 1431646 RoRoTrader
RoRoTrader's picture

 ?

Thu, 07/07/2011 - 03:05 | 1431849 bakken
bakken's picture

Maybe it is not wise to be contrary vis a vis Goldman published research.  Or....to believe it either.  GS makes money with the smarts of an insider, not an investor.  How can some clown in NYC forecast whether or not Saudi will blow, or what portion of oil pricing is anxiety money?  Or if The Chinese will use price dips to sock oil away in Manchurian reserve farms using a price floor $X???X/barrel to trigger buying.

Nope, GS research is just shitty, but not regular enough to count on.  I only hedge production values(as a producer), oil as a commodity is now sensitive to a World full of influences.  I trade corn, that is easier.  Last year I broke even on my spec day trading!!!

 

 

Wed, 07/06/2011 - 23:31 | 1431651 holdbuysell
holdbuysell's picture

"At this point we refuse to even recall whether Goldman is long or short oil."

Had to stop reading at this point, laughing to hard...as I can't recall either.

Nice one.

OT: Tyler, a good report "Brace Yourself" from Obamco was just issued. It's worth posting, if permitted.

Wed, 07/06/2011 - 23:39 | 1431666 Missiondweller
Missiondweller's picture

" and moderate increases in monetary buying"

 

I assume this means central banks.

Wed, 07/06/2011 - 23:44 | 1431669 Diablo
Diablo's picture

as per GS: "...over the long run silver prices tend to track the price of gold..."

so their 12mo forecast for Au is $1730

but their forecast for Ag is.....$28.90???? huh????

 

Thu, 07/07/2011 - 00:01 | 1431682 disabledvet
disabledvet's picture

I sense "an Ending"--still...these things do linger

 

http://www.youtube.com/watch?feature=player_detailpage&v=-zHID-Pa20E

 

Thu, 07/07/2011 - 00:06 | 1431685 zorba THE GREEK
zorba THE GREEK's picture

 Au forecast is $1730 because central banks are

 buying [ie] too big to manipulate.

 Ag  forecast is $28.90 because it is small enough market

 to manipulate. When that party ends (fiat currency

 crisis) Ag going to the moon.

Thu, 07/07/2011 - 00:07 | 1431687 Rynak
Rynak's picture

Some other mainstream investment websites also in the last 2 days have suddely switched to "buy PMs!". And when that happens in addition to GS recommending it, then that tells me that metals will be taken down soon big time.

I don't know how exactly, but i do suspect that the big justification for QE3, is just around the corner. If that were true, then RUN, because everything except of fiat will crash.

Thu, 07/07/2011 - 00:12 | 1431696 HowardBeale
HowardBeale's picture

Goldman's existence is akin to a successful serial killer who continually taunts the public and the police; there really needs to be an end to Goldman's existence soon, as, otherwise, we're going to have an army of vigilantes that kills anything that looks like Goldman (most equally guilty, some not). It's time to reclaim America and get on with raising our families: Obama, either you take them down or American citizens will.

Thu, 07/07/2011 - 00:20 | 1431708 Careless Whisper
Careless Whisper's picture

goldmansachs, a hedge fund in drag, took biggest fed loan, according to docs released this evening.

http://www.bloomberg.com/news/2011-07-06/goldman-took-biggest-loan-in-fe...

 

Thu, 07/07/2011 - 00:35 | 1431727 zorba THE GREEK
zorba THE GREEK's picture

 QE3 will send PM's skyward and USD down.

Thu, 07/07/2011 - 01:18 | 1431760 Pete15
Pete15's picture

We are so used to these crashes happening maybe a correction but come on the fundamentals scream get out of fiat, commodities are the only other option to save your purchasing power. Just because Goldman is losing its damn mind and dosent know what to do DOES NOT mean we do too; we're better than that. Maybe its possible they know we wanna do the opposite of them so they are fucking with us we got the momentum. Paul, Faber, Rogers and Schiff are getting more popular, people are listening and slowly waking up; they are realizing this sad fact

http://www.youtube.com/watch?v=S_v16Lrvt8o

 

BUY GOLD OR TRUST CENTRAL BANKS- Faber 

Thu, 07/07/2011 - 01:24 | 1431764 Monedas
Monedas's picture

Dear Diary ! What a relief ! I sold all that old silver I bought at $6 / oz. ! Now I'll wait for it to drop to $20 / oz. and get back in ! Maybe I'll buy back in with SLV or Comex ! I've learned a lot on the blogs ! I'm a more sophisticated trader ! Monedas 2011 Sounds pretty silly ? Your so lucky to have Monedas ! The Rock !!!

Thu, 07/07/2011 - 01:31 | 1431772 SloMoe
SloMoe's picture

What I continue to find remarkable, is ZH's ability to distinguish a Goldman flip from a flop. Without help, I can't see the difference; they look the same to me...

Thu, 07/07/2011 - 02:40 | 1431832 slaughterer
slaughterer's picture

Goldman has alot of debate circles, and they change opinion day-to-day according to latest developments.  Plus, since the company has turned into a large daytrading outfit, they must change opinion as many times as a day trader to earn money.   What is deplored as flip flopping is seen inside the company as keeping the clients informed of the latest calls in a timely manner.  I would go along with this bullish call on oil as the purchasers of the IEA oil (the Morgue included) try to drive oil prices up to realize a profit on their new supplies.  Makes sense.  But they are all undermining the President of the USAs best intentions to strengthen "the recovery"  (what an overused word.

Thu, 07/07/2011 - 06:19 | 1431904 Quinvarius
Quinvarius's picture

Goldman has long gold consistantly for a while now.

Thu, 07/07/2011 - 06:20 | 1431905 equity_momo
equity_momo's picture

Will hold off till Sep before i buy more Gold then.

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