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On Gold; Morgan Stanley Is Buying What Goldman Is Selling

Tyler Durden's picture




 

Just yesterday, Goldman Sachs suggested its clients should sell their gold (to them?) as the precious metal cycle had turned. It seems Morgan Stanley disagrees; the firm's preferred fundamental metal exposure for 20913 is Gold. Expecting Silver to outperform also (given its 'cheaper' store of value), MS believes nothing has changed on the fundamental thesis for owning gold as the adoption of QE 3 (and 4...) and the ECB's commitments (and BoJ) remain the most important factors for a continuation of weakness in the TWI trend for the US Dollar. They also add that low nominal and negative real interest rates, ongoing geopolitical risk in the Middle East and continued mine supply issues are also supportive. From India and ETF demand to central bank buying and USD weakness - MS seems to be buying what GS is selling (or is less about muppet-mauling).

 

Via Morgan Stanley:

Gold remains our preferred fundamental metal exposure heading into 2013. Gold has long been viewed as safe haven and store of value. However, in recent years, global fiscal and monetary developments have given gold a more prominent role as both a central bank reserve asset and one with a value akin to cash as the global financial system moves to adopt Basel III standards for capital in 2015.

We see a number of items that should drive further price appreciation from here.

Weaker USD: The US Federal Reserve commitment to a near zero Federal Funds rate though 2014 and open ended purchases of mortgage backed securities should continue to pressure the value of the US dollar on a TWI basis. At the same, the ECB’s decision to adopt an unlimited bond purchase program through the Outright MonetaryTransactions (OMT) initiative, subject to the conditionality of a full EFSF/ESM facility, reduced downside risks for the euro and increased the likelihood of downward pressure on the TWI of the USD, via the USD/EUR cross rate.

Central Bank buying: Central banks’ preference for gold as a reserve portfolio asset further underpins the continued growth in gold investment demand. 3QTD, net increases in central bank holdings were 268t or 8,616Mozs, led primarily by emerging market central banks. The official sector has now been a net buyer of gold each year since 2009, as developed economies’ central banks have sold increasingly small quantities of gold.

 

ETF demand: The bedrock of growth in investment and retail demand  remains the physically backed exchange traded funds (ETFs). In the  3Q12, global ETF holdings increased by 189t, a 56% increase YoY.

 

Recovery in Indian demand: Moreover, the Indian jewellery and  investment market is also showing signs of recovery as Indian  purchasers acclimate to recent price trends amid restocking ahead of the Indian wedding and festival season.

 

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Thu, 12/06/2012 - 16:49 | 3040444 BigMike
BigMike's picture

Wait, using reverse logic -- isn't MS selling what Goldman is buying?

Thu, 12/06/2012 - 16:59 | 3040477 Pladizow
Pladizow's picture

Yeah this week. Then next week the two fraudsters will colaborate and reverse positions to churn out those fees and X-mas bonuses!

Thu, 12/06/2012 - 17:55 | 3040649 ParkAveFlasher
ParkAveFlasher's picture

You rig the gold-y price-y and you turn yourself around, that's what $1700/oz is all about.

Thu, 12/06/2012 - 19:35 | 3040947 Matt
Matt's picture

Wow, talk about long term, they recommend holding gold for the next 18,000 years according to the article. 

Thu, 12/06/2012 - 21:29 | 3041286 GetZeeGold
GetZeeGold's picture

 

 

Gold has been around for 1000s of years.....AAPL.....not so much.

Thu, 12/06/2012 - 16:58 | 3040479 DoChenRollingBearing
DoChenRollingBearing's picture

It does not really matter which investment bankers say what.  Buying physical gold is just plain common sense in an era as treachorous and stupid as we are stuck in now.

Thu, 12/06/2012 - 17:01 | 3040489 BigMike
BigMike's picture

Yes, I tend to agree. I think that it is possible to have too much information. I hope I can pass on my gold to my family when I die. These investment bank reports are probably more valuable to a trader/professional than a JOE Q PUBLIC long term holder of a gold like me. 

Thu, 12/06/2012 - 17:06 | 3040504 kliguy38
kliguy38's picture

yeh....I think one of um might be lying....wait....both of um are liars so yeh.....MS is selling cheap gold to GS....yup that's it MS is givin' GS a wrap around tug

Thu, 12/06/2012 - 17:15 | 3040535 SilverMoneyBags
SilverMoneyBags's picture

And what evidence do you have to support your claims that MS is also selling?

Thu, 12/06/2012 - 18:53 | 3040826 Mactheknife
Mactheknife's picture

Of course the two biggest remaining mysteries of the universe are...Goldman Sachs still has clients? and... Who are these idiots?

Thu, 12/06/2012 - 16:49 | 3040445 yabyum
yabyum's picture

k

Thu, 12/06/2012 - 16:50 | 3040449 Badabing
Badabing's picture

k?

Thu, 12/06/2012 - 16:53 | 3040460 yabyum
yabyum's picture

Some say buy, others say sell. I say stack it. The real stuff, the shiney. No paper for da hedge.

Thu, 12/06/2012 - 16:59 | 3040481 SemperFord
SemperFord's picture

I have stacked but not sure if I will be around in the year 20913 anyway

Thu, 12/06/2012 - 16:50 | 3040446 Badabing
Badabing's picture

It cant be real gold!

Thu, 12/06/2012 - 16:50 | 3040447 Rastadamus
Rastadamus's picture

Gold guns and Sarin Gas! YEE HAW BITCHEZ!

Thu, 12/06/2012 - 16:53 | 3040462 Iam Yue2
Iam Yue2's picture

Stronger rupee makes Gold cheaper and does indeed boost demand on the ground, but it also contributes to trading losses and the closure of positions by funds. The wedding season ends in seven weeks and an appreciating rupee will serve as a cap on price, regardless of demand from punters on the ground. It will be interesting to see how this one plays out.

Thu, 12/06/2012 - 16:53 | 3040466 LongSoupLine
LongSoupLine's picture

Boy, you know shit is fucked up when I agree with Margin Stanley.

Thu, 12/06/2012 - 16:57 | 3040471 Winston Churchill
Winston Churchill's picture

Seems the Muppet Slayers can't coordinate with each other.

Hopefully the thieves are falling out.There can only be one.

Thu, 12/06/2012 - 16:57 | 3040472 yogibear
yogibear's picture

LOL, Goldman clients and readers loosers, MS hedge funds bought cheaper. Goldman has a pool of chump clients they can shake funds from.

Thu, 12/06/2012 - 16:56 | 3040474 Cognitive Dissonance
Cognitive Dissonance's picture

Mind control is a beautiful thing to observe.

<Doesn't apply to me, just those greater fools over there.>

Thu, 12/06/2012 - 17:00 | 3040486 Bay of Pigs
Bay of Pigs's picture

Like this daily serving of Bankster propaganda?

Thu, 12/06/2012 - 16:59 | 3040480 The Master
The Master's picture

And this is why MS will be the next big bank to fail....do not deviate from the "gold is a barbarous relic" TPTB script

Thu, 12/06/2012 - 17:00 | 3040484 DoChenRollingBearing
DoChenRollingBearing's picture

Hmm, interesting comment.  I´ll remember that you said that if/when that comes true.

+ 1

Thu, 12/06/2012 - 17:06 | 3040501 The Master
The Master's picture

Thanks. Although I could be wrong and this could just be a coordinated TPTB disinformation campaign. Maintain divisive views on gold to prevent the masses from piling into the "barbarous relic." This is no different from red states/blue states, muslims/jews, etc

Thu, 12/06/2012 - 17:17 | 3040546 SilverMoneyBags
SilverMoneyBags's picture

Is that why central banks are labeling gold as a tier 1, risk free asset?

Thu, 12/06/2012 - 20:25 | 3041102 Theosebes Goodfellow
Theosebes Goodfellow's picture

How can one complain if it has no counterparties? How many asset classes fall in that category?

Thu, 12/06/2012 - 17:48 | 3040630 Ookspay
Ookspay's picture

Correct, MS will fall due to it's european malinvestments.

Thu, 12/06/2012 - 17:03 | 3040496 buzzsaw99
buzzsaw99's picture

big. old. bubble.

Thu, 12/06/2012 - 17:03 | 3040499 Kastorsky
Kastorsky's picture

GS is desperate 

Thu, 12/06/2012 - 17:34 | 3040589 Bastiat
Bastiat's picture

+1for the thought.

Thu, 12/06/2012 - 17:11 | 3040519 Bastiat009
Bastiat009's picture

I have been reading here that gold ETF was not about gold, so I guess Goldman is right.

I have been reading here that central banks lie, so I guess Goldman is right.

I have been reading here that Goldman is never right, so I guess someone is lying.

This is getting interesting.

Thu, 12/06/2012 - 17:11 | 3040520 mayhem_korner
mayhem_korner's picture

 

 

Everything that has driven gold to its current (still suppressed) 1700 handle is mathematically bound to continue going forward.  This is all just the rowdies making noise over some short-term bragging rights.  Won't stop me from feeding my stack each month...

Thu, 12/06/2012 - 17:13 | 3040529 delivered
delivered's picture

The gold investment play of that last decade was primarily a CB issue as the CBs from around the world thought that they could solve the economic woes of the world by themselves. Starting after 9/11 and running through the balance of this year, western economy CBs continue to flood the market with liquidity through whatever means they can (i.e., debt purchases, bailouts, ZIRP, and the list goes on and on). But two points should be noted with this CB era (which is coming to an end from the perspective of having a profound impact on PM prices).

First, the CBs really didn't have any other choice as if they didn't buy the debt (or have their proxies buy the debt) that the market does not want, nobody would (and governments would fail).

Second, the effect of further CB efforts on the real economy continue to diminish as it takes more and more committments which produce lower and lower returns. The bottom line is nobody really believes the BS the CBs are spinning these days. Hell, the CBs are actually moving towards direct market purchases of debt which would have been unthinkable 5+ years ago (just like trillion dollar deficits but those are so in the past, just like a cassette tape).

This is not to say CBs wont continue their efforts, which they will (as their egos will not let them accept the hard realities present), but I don't see their continued efforts as the real catalyst for long-term PM price increases. Rather, I see a continued consolidation period for PMs which may last another two to four years before the real opportunity takes hold which will be squarely based in soverign debt defaults (even in the US) which will trigger the eventual currency crisis which will finally drive the necessary rebalancing of wealth from the west (consumed too much and produced too little) to the east and let the world economies bottom out before growth can be realized again.

So my only question is one of timing in that the US has deep pockets to bury their debt problem. Whether it is the Fed, their bank proxies, corporate balance sheets, pension plans or other retirement accounts, there would appear to be capacity in these locations to "cram down" ownership of US debt as a means to mask the real problem for a few more years. Of course this represents a very poor use of capital and will become an increasily heavy anchor weighing down an aging ship (until it sinks it) but the point is, the US most likely has the ability to bury its debt problem by investor choice or if needed, by force (e.g., requiring X% of a retirement account to be invested in US debt). At a annual deficit of a trillion plus dollars a year, along with net foreign sellers and the need for SS to liquidate US Debt to support negative burn rates, the market may have to absorb $1.5 trillion plus of debt per year. Not sure about the capacity, but I would think that after four or five years, these sources will be stuffed to the gills with this crap and nowhere to unload it.

 

Thu, 12/06/2012 - 17:14 | 3040531 Madcow
Madcow's picture

Gold is struggling to stay aloft at $1700.  

This is proof that the "Central Bankers" have lost control - and that we are headed into a deflationary abyss - and there's nothing the Fed - or anyone else can do about it. Our money supply VAPORIZING - becuase it is dependent upon forces that are no longer in place. "Reserves" on the balance sheets of insolvent banks do not count as money - as they will never be lent into existence. 

30 years of bankrupty, deflation, debt repudiation dead ahead - 

 

Thu, 12/06/2012 - 17:29 | 3040576 mayhem_korner
mayhem_korner's picture

 

 

That gold is sitting at only 1700 is proof that the CBs are still in control (of perception, any way). 

Thu, 12/06/2012 - 17:20 | 3040543 debtor of last ...
debtor of last resort's picture

Like i said: keep it steady. Too low: physical shortage. Too high: muppet inflation awakening.

Thu, 12/06/2012 - 17:17 | 3040545 Zgangsta
Zgangsta's picture

Is 20913 code for something?  Like 5150?

Thu, 12/06/2012 - 17:32 | 3040581 EvlTheCat
EvlTheCat's picture

Yes, it's the zip code for Silver Springs, MD.  I can only assume it is a subliminal message to buy more silver bullion from the Tylers.

Thu, 12/06/2012 - 17:28 | 3040575 Stubert
Stubert's picture

Don't you get it by now.  When they tell you to sell PM's.  They are asking you to sell your real stuff, they will quietly buy it.  When they say buy, they are telling you to buy the paper stuff.  So it doesn't matter who says buy or sell.  The end result is that the sheeples always get the shaft.

No need for any reverse psychology from any of the brokerages, investment banks etc...

 

 

Thu, 12/06/2012 - 17:46 | 3040621 Row Well Number 41
Row Well Number 41's picture

"If god did not want them sheared, he would not have made them sheep."

Calderon from the Magnificent 7

 

#41

Thu, 12/06/2012 - 17:44 | 3040617 neffy
neffy's picture

The Gold story is clear to everyone and PM ought to go up, but technicals are telling me "sell sell", and so I do. I expect PM to plunge welll into 2013. Just my 2 c...

Thu, 12/06/2012 - 18:35 | 3040776 Harbanger
Harbanger's picture

"Just my 2 c..." :)

Thu, 12/06/2012 - 17:48 | 3040629 Michelle
Michelle's picture

Based on the Greater Fool Theory, shouldn't one sell to the greatest fools, the Central Banks, and aren't they buying now? How else can the Big Boys unload - retail doesn't have enough buying power to support prices at this level.

Fortunately I sold both my silver and gold holdings last year near their tops and won't buy again until the next low...in 10+ years.

Thu, 12/06/2012 - 18:32 | 3040763 Harbanger
Harbanger's picture

Good move michelle.  The smart money is long on equities and bonds.

S/

Thu, 12/06/2012 - 18:03 | 3040673 DavosSherman
DavosSherman's picture

Ssssssshhhhhhhhh don't tell ilene or her friend Price.

Thu, 12/06/2012 - 18:08 | 3040688 negative rates
negative rates's picture

WE were good till about here:

ETF demand: The bedrock of growth in investment and retail demand  remains the physically backed exchangetraded funds (ETFs).

Then you lost me.

Thu, 12/06/2012 - 18:14 | 3040710 DavosSherman
DavosSherman's picture

Derivative pppponzi

Thu, 12/06/2012 - 18:25 | 3040748 MeelionDollerBogus
MeelionDollerBogus's picture

http://flic.kr/p/dvDHf2 - fools & their gold are easily parted

Long boating accidentz, bitchez

Thu, 12/06/2012 - 18:52 | 3040823 fuu
fuu's picture

Fucking Gold Bitchez!

Thu, 12/06/2012 - 18:57 | 3040838 orangegeek
orangegeek's picture

The US Dollar is the key.  A stronger US Dollar and all that is denominated in US Dollars will fall.

 

http://bullandbearmash.com/chart/dollar-rises-today-bottom-place/

 

A big jump today in the US Dollar - could be a confirmation of a turn back up.

Thu, 12/06/2012 - 22:02 | 3041365 Its_the_economy...
Its_the_economy_stupid's picture

All is denominated in ounces of gold.

Thu, 12/06/2012 - 20:00 | 3041020 WhiteNight123129
WhiteNight123129's picture

What is wrong with Morgan Stanley, what happened, Steven Roach got promoted? They are hiring people from CLSA? Are they so desperate that they are trying to make money by fees instead of prop trading because they do not have hte scale? It might actually work.

 

Thu, 12/06/2012 - 21:04 | 3041227 catacl1sm
catacl1sm's picture

GOLD AND SILVER! SILVER AND GOLD!

Fri, 12/07/2012 - 03:54 | 3041866 Lord Of Finance
Lord Of Finance's picture

The only person who should be selling gold in this insane economic environment is your local coin dealer. Forget Goldman's economic pronouncements. Look to the far east to see what you should be doing in terms of buying or selling gold.

Fri, 12/07/2012 - 06:37 | 3041949 Gunga
Gunga's picture

A bikini clad girl on the beach in Tel Aviv with a rifle slung over her shoulder took mine,,,,, actually I just gave it to her.

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