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Goldman Keeps Gold Short As It Lowers Stop Price, Even As It Is Stopped Out On Commodity Basket For 6% Loss

Tyler Durden's picture




 

Yesterday, Goldman was stopped out of its inflationary Long Brent reco for a 15.5% loss (for the clients of course, not for the Goldman counterparty traders who made 15.5%). Today, it was time for Goldman to get stopped out on its Commodity Carry Basket, after the firm's 6.0% stop loss was triggered: "Spillover from gold and renewed European and EM macroeconomic concerns also created sharp sell-offs in crude oil and base metals, that were mostly front-end driven, crushing spreads (the carry), as longer-dated prices remained remarkably stable. This stopped us out of our CCB (Commodity Carry Basket) recommendation with the potential loss reaching our 6.0% stop." With gold now trading below the revised stop out target, we will watch to see if Goldman lower its target once more to buy even more paper gold that its clients are furiously selling.

But ironically, while goldman was closed out on its various broader baskets, the firm refuses to cover its gold short from just a week ago, and instead it has lowered its gold price target from $1450 to $1400.  Why: because it wants its clients to sell it some more gold please. Much more if possible.

The logic:

Although gold has now traded below the $1,450/toz target embedded in our short recommendation, we are maintaining our short as we argued last week that prices could decline more than we initially thought as positioning is stretched and the momentum is to the downside. The most recent ETF holdings showed acceleration in the liquidation of length, which points to a broad-based sell-off extending beyond the futures markets with potentially more room to go. As a result, we are now lowering the stop to $1,400/toz (which locks in a potential gain of 12%) while we wait for evidence of a bottom, though we are not changing our price forecasts now.

And the firm's explanation for the gold tumble? All Cyprus' gold sale (so Goldman's ECB Draghi's) fault:

Over the previous five years the two highest conviction trades in the commodity complex were being long gold in response to the debasing actions of central banks around the world and short natural gas in response to the shale revolution. These two trends have now likely reversed (see Exhibit 1) and our conviction in these new trends has risen significantly over the past month as we have introduced both short gold and long natural gas trading recommendations.

 

Further, these shifts in trends represent a significant departure from the past decade and are implicitly interrelated. The shift in gold represents a more confident economic environment where there is a flicker of light at the end of the tunnel to this period of easy money while the shift in natural gas represents the ability for trend natural gas consumption in the US to near 3.0%. This underscores how the shale revolution has helped shape the improving economic environment in the US – making US natural gas and the US economy the new safe haven.

 

This past week saw both of these trends accelerate with the extremely large gold move likely being triggered by growing fears that the central bank of  Cyprus would sell its gold reserves, potentially triggering a larger monetization of gold reserves across other European central banks. The decline in prices was further exacerbated by the breach of a well-flagged key technical price support level at $1,530/toz and then at the $1,434/toz 200-week moving average, creating the largest one day price decline since the inception of the COMEX. Although gold has now traded below the $1,450/toz target embedded in our short gold recommendation, we are maintaining our short recommendation, as we argued last week that prices could decline more than we initially thought as positioning is stretched and the momentum is to the downside.

 

The most recent data on ETF holdings from last Friday (April 12) showed acceleration in the liquidation of length, which points to a broad-based sell-off extending beyond the futures markets with potentially more room to go (Exhibit 2). Accordingly, we are now lowering the stop to $1,400/toz (which locks in a potential gain of 12%) and waiting for evidence of a near-term bottom to establish a new target; however for now, we are not changing our price forecasts.

 

Once again: who is buying when Goldman's clients are selling (to Goldman)?

 

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Tue, 04/16/2013 - 09:44 | 3455911 firstdivision
firstdivision's picture

Bought more paper gold to earn more paper IOU's.  Thanks GS Prop!

Tue, 04/16/2013 - 09:52 | 3455951 bullionbaron
bullionbaron's picture

Could we be at the last sell off before the metals go parabolic? Similar setup to Oil and Nasdaq: http://smartmoneytracker.blogspot.com.au/2013/04/setting-stage-for-bubbl...

The phyiscal buying certainly wouldn't indicate bubble, where are the sellers? http://www.bullionbaron.com/2013/04/surge-of-buyers-rush-for-physical-go...

Tue, 04/16/2013 - 09:57 | 3455975 DeadFred
DeadFred's picture

Anyone got the data on positions to know how many of those "buyers" were shorts closing out their positions?

Tue, 04/16/2013 - 10:01 | 3455989 firstdivision
firstdivision's picture

We just finished downloading it and we're putting it into a spreadsheet now.  Oh wait, hold on.  We need to first analyze the Brazzers data that we just finished downloading, first.

-SEC

Tue, 04/16/2013 - 10:00 | 3455986 Lewshine
Lewshine's picture

Where are the sellers? There is NO sellers, but one...The Fed. And they are not done. This raid will go on till they have raped every last penny of value, spooked everyone out of the trade, and by then they will have accumulated 90% of the world's PM, Covertly protected their precious toilet paper - and continue to reign over the sheep of the world. It always goes their way - Its funny like that.

Tue, 04/16/2013 - 10:22 | 3456073 Lewshine
Lewshine's picture

You know what this PM raid has proven to me? How absolutely clueless the so-called professionals in the market are about who basically runs every jot and tiddle in all investable assets. Seriously, these guys really don't realize who runs these financial markets. Now, maybe its based on not biting the hand that feeds them, but nonetheless - They justify and defend the staus quo, which is quite sickening.

Tue, 04/16/2013 - 10:31 | 3456108 Diogenes
Diogenes's picture

They ARE the status quo.

Tue, 04/16/2013 - 10:38 | 3456128 Blast_Bug
Blast_Bug's picture

http://www.kitco.com/images/live/gold.gif

Now why do I get the feeling yesterday's "Action" is following the 'wash-rinse-repeat' cycle?  Can we all just go into COMEX, and by the June call options and take delivery?  (Oh, I forgot, we might get 'CORZINED' again)  

Tue, 04/16/2013 - 09:46 | 3455925 ak_khanna
ak_khanna's picture

The stock, commodity and currency exchanges have been reduced to gambling dens whereby the more powerful traders with deep pockets move the markets to maximize their own profits at the expense of the remaining not so powerful players.

The big boys have enormous money power to move the markets in the direction which results in maximum profits for themselves. They effectively use the media to lure the other players in the market to a position where they would incur maximum loss.

The markets will fall only when the banksters have eliminated all the short positions and only they themselves have positioned themselves to profit when the market falls

OR

When an unexpected world event catches the banksters with their pants down and the softwares they use to rig the markets go berserk beyond their control.

http://www.marketoracle.co.uk/Article35345.html

www.letstalkmoney2012.in

Tue, 04/16/2013 - 10:14 | 3456035 Kirk2NCC1701
Kirk2NCC1701's picture

Where's Anon when you need them to do a good deed?  A real deed.  Not just "showing off" for their CIA/NSA bosses.

Tue, 04/16/2013 - 10:30 | 3456102 web bot
web bot's picture

Your last comment on unexpected world event is bang on... and it will likely be this event that triggers the cascade.

Tue, 04/16/2013 - 09:47 | 3455926 fonzannoon
fonzannoon's picture

This ain't over yet, Get out your barf bags because if this is what everyone thinks it it they are going to shake the trees harder than ever before.

Tue, 04/16/2013 - 09:51 | 3455948 Dr. Engali
Dr. Engali's picture

Agreed...volatility is not a two day event. We are in for a wild ride.

Tue, 04/16/2013 - 09:59 | 3455980 gjp
gjp's picture

Yet a sharp selloff in the stock market is a one-day event at most.  Central banker nirvana

Tue, 04/16/2013 - 10:20 | 3456062 Manipuflation
Manipuflation's picture

No doubt gjp.  DJIA up bigtime.  Gold is currently fading a bit.  I thought 2008 was bullshit but this has turned into the biggest bunch of bullshit I have ever seen in my life.*  What else should I have expected from the fuckers though?  Ain't selling any phyzz here.

* Well there was that Gordon Brown thing though too.

Tue, 04/16/2013 - 10:01 | 3455985 Bicycle Repairman
Bicycle Repairman's picture

Two words:  double tap.

 

It's all the rage.

Tue, 04/16/2013 - 10:00 | 3455987 Manipuflation
Manipuflation's picture

Agreed on that.  Nice recovery to start on the overnight but I do not like what I am seeing now.  I am going to have to bench myself from making a call but the fact that I am seeing some old school phyzz traders on ZH is an indicator of sorts.  They are watching.  They ain't selling at spot either.

Tue, 04/16/2013 - 10:06 | 3456001 Paper CRUSHer
Paper CRUSHer's picture

Quadruple agree....this ain't no picnic and it certainly ain't for those senstive types.

Tue, 04/16/2013 - 10:33 | 3456111 eclectic syncretist
eclectic syncretist's picture

Typical action after such a dramatic sell-off would be to test yesterdays lows before heading higher over the next several days or so, then another test of the lows that determines where it goes next.  However, given that we're talking about paper gold and silver, in order to go lower there would necessarily be an increased risk of complete disconnect between paper and physical. It could happen, if TPTB prevent all delivery of physical somehow.

Either way, I don't really care, because over 1 million ounces of gold has been called for delivery already this month, and COMEX only has 2.8 million ounces registered and available to deliver. 

Compare the delivery notices to the warehouse stocks. 

http://www.cmegroup.com/trading/energy/nymex-delivery-notices.html

JP Morgans registered gold, in particular, has been decimated.

http://www.theburningplatform.com/?p=52558

 

 

Tue, 04/16/2013 - 10:12 | 3456027 Melin
Melin's picture

What's the price of a good no one is selling?

Tue, 04/16/2013 - 10:25 | 3456088 agent default
agent default's picture

Higher than COMEX.  But there will always be a price to sell.

Tue, 04/16/2013 - 12:08 | 3456672 KnightTakesKing
KnightTakesKing's picture

Provident Metals is selling ASE at $6 over spot with deliverys delayed (April 30 ship dates).

Tue, 04/16/2013 - 09:51 | 3455942 Bearwagon
Bearwagon's picture

It's called "terror tuesday" for a reason, I know, but the direction, from which the terror emerges, stuns me time and again. Oh - look what's going on in boston ... nothing to see here, move along ...

Tue, 04/16/2013 - 09:55 | 3455962 therover
therover's picture

Interesting how gold is sniffing $1400 but not getting there.

Guess the new trading range went from $1500-$1600 to $1300-$1400.

 

Tue, 04/16/2013 - 09:57 | 3455976 lemarche
lemarche's picture

THEY MAY WELL TRY TO CRUSH IT A BIT FURTHER, 1250/1200

Tue, 04/16/2013 - 10:01 | 3455996 Arius
Arius's picture

then what?  if they wanted to sell physical at those prices they would have capped it there long ago ... this is just few days trade ... you get in while you can ... otherwise wishful thinking good luck scaring everyone ... it doesnt matter!

Tue, 04/16/2013 - 10:18 | 3456053 Kirk2NCC1701
Kirk2NCC1701's picture

Don't forget fundamental analysis.  At that price, you're at the production costs of gold.  And supply will dry up for all but CBs, who will pay a delivery premium directly.  Will also see mine buyouts/consolidation.

As for the rest... No Gold For You!

 

Tue, 04/16/2013 - 10:00 | 3455981 Arius
Arius's picture

yes, until the end of the day ... lol

Tue, 04/16/2013 - 09:56 | 3455963 TWSceptic
TWSceptic's picture

It's pretty obvious what's happening here, yet no media coverage as usual.

 

Don't try to catch this falling knife. Weak hands need to be removed before any bottom can be formed.

Tue, 04/16/2013 - 13:15 | 3456973 ActionFive
ActionFive's picture

Enough of the weak hands talk- we need more dumb hands willing to buy and hold Comex

But, how to convince them to buy when the fundo's are so good, and the price just keeps falling

Tue, 04/16/2013 - 09:55 | 3455964 lemarche
lemarche's picture

FADE GS RECOMMENDATIONS YOU MUPPETS !!...

Tue, 04/16/2013 - 09:56 | 3455971 Hayabusa
Hayabusa's picture

What happened in Boston is horrible... but what's more horrible is the fact that so many soldiers, bomb sniffing dogs, etc., were present and just prior to explosions people were told to remain calm, that it was only a drill.  Of course this was preceded by PMs dropping in price like a rock.  Hit em on the financial, then emotional fronts... keep the sheeple scared, confused and guessing about who done it - is it just me or does does something smell rotten in here?

Tue, 04/16/2013 - 10:07 | 3456012 Bearwagon
Bearwagon's picture

It is at least me, too, who smells something very, very rotten, and ... kind of awfully familiar. Now wait for Department of Homieland Security to exploit this, like there has never been anything more important. Of course, they didn't achieve jack shit, these poor people are dead, but that must shirley be due DHS's lack of several billions of your hard earned dollars. This reeks indeed. And naturally you will have to turn in all your weapons now, you see how they made this possible, don't you? Yeah, I know: Out of my cold, dead ass ... they may accept that proposal, wait for it.

Tue, 04/16/2013 - 10:12 | 3456004 Quinvarius
Quinvarius's picture

I doubt China is going to let some paper traders kill its mining industry and trash its citizens savings.  China was very gracious with this nonsense so far to allow JPM to fix their supply mess.  The US may be fine with ending all the mining companies by pushing PMs below mining costs with unfillable paper contracts.  China has a real economy to protect. 

Peter Schiff is right anyway. 

Tue, 04/16/2013 - 10:14 | 3456033 LawsofPhysics
LawsofPhysics's picture

Correct, and just like Germany in the 1930's they will do whatever it takes to protect it.  Oh wait...

Tue, 04/16/2013 - 10:31 | 3456112 Quinvarius
Quinvarius's picture

In this printing press backed environment, paper prices are picked, despite supply and demand.  We don't really have a market.  Prices too low and no supply?  Too bad.  GS is trying to pick a price with unbacked paper shorts contracts.  It has already resulted in the COMEX, the LBMA, and the retail markets being drained of supply.  There is no reason China should not enforce a profitable price to keep their country from sliding into the same Hellhole as we did.  The gold standard was always a maintained ratio to stop over volitility from upsetting the economy anyway.

Lets face it.  If bankers didn't have a printing press at their back, they would have to respect actual supply and demand.  Instead we get a situation where they have decided the whole mining sector needs to be killed off.  There is no supply because they want to sell hundreds of trillions of fake paper supply speculatively.  Even if you accept the brainwash and don't like miners, who do they go after next?

Tue, 04/16/2013 - 10:12 | 3456029 LawsofPhysics
LawsofPhysics's picture

Watch the physical markets.  When goods and services stop crossing boarders (and gold is no exception) troops will.  Ignore all the paper markets from this point forward.  Fine to play in them and turn profit into physical, but don't play with what you can't lose from here on out.  

Tue, 04/16/2013 - 10:17 | 3456052 Bearwagon
Bearwagon's picture

"Don't play with what you can't lose." That's excellent advice.

Tue, 04/16/2013 - 10:16 | 3456044 topshelfstuff
topshelfstuff's picture

IMO

BUYERS = the Persnal Accounts of the Big Shots

 

Sellers/Shorters if a point is reached where Losses cause a Bail-Out, the Taxpayers would end up with the Losses

 

IMO some Hedge Funds are created to be Designateed Losers that will eventually get Bailed Out via the New Powers given to Treasury back in '09

I think we're at the Point where its the Personal Accounts where Gains are mostly targeted to

Tue, 04/16/2013 - 10:16 | 3456050 The Invisible Foot
The Invisible Foot's picture

That's Goldman!

Tue, 04/16/2013 - 10:50 | 3456077 Downtoolong
Downtoolong's picture

Reading these Goldman reports is like a how-to lesson in, Saying You Screwed Up While Still Sounding Professional.

In theory, it’s just as improbable to be wrong most of the time as right most of the time. That’s how you know it’s still all contrived and rigged in advance.

Tue, 04/16/2013 - 10:50 | 3456184 RaceToTheBottom
RaceToTheBottom's picture

OK 7 Sigma is either man made or paper Gold does not follow a Normal distribution. 

Then the real question is why not a Normal distribution? 

Because it is Asymmetrical and more is being lent out by Central Banksters on the way down than on the way up.

 

Fractional Gold Lending by Banksters

Tue, 04/16/2013 - 11:12 | 3456311 slimething
slimething's picture

Why do I get the impression the current gold dump is being done to "fix" the balance sheets of the Fed? Is that a nutty hypothesis? Isn't this basically a rehypothication of paper not unlike OTC derivatives? Someone educate me. 

Tue, 04/16/2013 - 11:35 | 3456428 FieldingMellish
FieldingMellish's picture

At least we will know when they are done accumulating... $1400.

Tue, 04/16/2013 - 14:54 | 3457456 roadhazard
roadhazard's picture

I would like for silver to go to ten dollars. Bad news, margin calls, taxes and manipulation are all lined up in the stars right now. With the world as fucked up as it is I believe this crush is temporary.

Tue, 04/16/2013 - 20:33 | 3458875 anthonymaw
anthonymaw's picture

In any trading session there is always a counter-party to the trade.  SO WHO'S BUYING UP GOLD AT FIRE-SALE PRICES ????  Somebody clearly isn't buying the "dis-information" being spewed by those greedy and corrupt American Capitalist jerks (you know the bunch).  Besides, what kind of "recovery" is the USA getting when they are throwing 85 billion in phoney fiat money every month, ad infinitum, from the roof of the Federal Reserve Bank a.k.a. Quantitative Easing?  'Nuf said.

Tue, 04/16/2013 - 21:23 | 3459048 RaceToTheBottom
RaceToTheBottom's picture

I work with a cmpany full of H1Bs from India.  They were loading up the cars and making a trip to the PM stores yesterday and friday and over the weekend.

 

I suppose it is not enough to send them over here to take all our tech jobs, the banksters have to sell them our gold at firesale prices.....  Indians and the chinese

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