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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BigMike's picture

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

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!

ParkAveFlasher's picture

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

Matt's picture

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

GetZeeGold's picture



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

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.

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. 

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

SilverMoneyBags's picture

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

Mactheknife's picture

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

yabyum's picture

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

SemperFord's picture

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

Badabing's picture

It cant be real gold!

Rastadamus's picture

Gold guns and Sarin Gas! YEE HAW BITCHEZ!

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.

LongSoupLine's picture

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

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.

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.

Cognitive Dissonance's picture

Mind control is a beautiful thing to observe.

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

Bay of Pigs's picture

Like this daily serving of Bankster propaganda?

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

DoChenRollingBearing's picture

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

+ 1

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

SilverMoneyBags's picture

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

Theosebes Goodfellow's picture

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

Ookspay's picture

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

buzzsaw99's picture

big. old. bubble.

Kastorsky's picture

GS is desperate 

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.

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...

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.


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 - 


mayhem_korner's picture



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

debtor of last resort's picture

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

Zgangsta's picture

Is 20913 code for something?  Like 5150?

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.

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...



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



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...

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.

Harbanger's picture

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


DavosSherman's picture

Ssssssshhhhhhhhh don't tell ilene or her friend Price.

MeelionDollerBogus's picture

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

Long boating accidentz, bitchez