The Complete Annotation Of SocGen's Latest Hit Piece On Gold

Tyler Durden's picture

Gold has held firmly above $1300 for over two weeks, confounding those who said it would never see that key level again, but as the constantly-bearish SocGen explains in this 'astounding' report, gold's downturn is set to return... except their reasoning has a fatal flaw - it's entirely factually incorrect.



As SocGen writes...

Gold holds firmly above $1,300/oz
After showing a lack of price direction in the first two months of this quarter, gold entered a new uptrend in June, gaining 6% in the first three weeks and hitting a two-month high of $1,322/oz (on an intra-day basis) on the 19. A much firmer tone in gold was supported by the June CFTC data, which showed a steady increase in the long-side speculative position, to reach its highest level since May 2013 in the last week of the month. It touched a high of just over $1,332/oz earlier this week but slipped thereafter, but continued to hold firmly above the $1,300/oz level.

[ZH - a big surprise to many that Gold was the best-performing asset in Q1]

Economic worries prompt safe-haven buying
Demand for safe-haven gold was sparked by fresh concerns about global economic recovery after the World Bank slashed its global growth forecast for this year, blaming severe weather conditions in the United States, financial market turmoil and the crisis in Ukraine. Similarly, the OECD cut its forecasts for global growth this year and next, citing slowing economic activity in emerging countries and concerns about the US Federal Reserve's tapering. The escalation of violence in Iraq was among other factors supporting gold prices.

[ZH - yes]

But Gold's downtrend to resume on improving US economy...
Looking ahead, we believe that gold's current shine is unlikely to last and the downtrend, which started in 2013, is likely to resume as we move into the second half of the year. First, US economic data indicates that economic activity has picked up in recent months, pointing to stronger growth in the second quarter. This has been supported by further improvement in labour market conditions and upbeat manufacturing data. We are therefore likely to see continued tapering of the Fed's asset purchase programme, and, later on, a gradual normalisation of the policy, weighing on gold's safe haven appeal.

[ZH - improving US economy? Q1 GDP was worst in 5 years, Q2 GDP estimates are tumbling, and 2014 GDP expectations are now the lowest since forecasts began]

...Weak physical markets...
Second, support from the physical market remains weak, as there has been a lack of investment demand from key Asian markets. Gold's recent rally, in addition to sustained yuan weakness, weighed on gold demand in China, which last year overtook India to become the world's largest gold consumer. Gold imports from Hong Kong, the main channel for gold into the country, fell in May to the lowest level since January 2013, although some of this decline can be explained by increased volumes going through Shanghai. In addition, increased concerns about the use of gold to back loans, after Chinese authorities reportedly discovered billions of dollars of illegal gold financing transactions, have weighed on gold prices.

[ZH - actually the Chinese commodtity-financing-deals implies gold strength as forward/future hedges are unwound driving prices up and wagging the spot market's tail higher]

Gold demand in India, the second largest consumer of the yellow metal, has been restrained by the government's stringent measures introduced last year and aimed at reducing the country's massive current account deficit by imposing restrictions on gold imports. While it is widely expected that the new government will cut the duty on gold imports at its upcoming annual budget in July, this is unlikely to drive imports significantly higher as the 80:20 rule is expected to remain in place for some time. In the meantime, while the gold industry is waiting for a possible easing of restrictions, demand for gold remains subdued.

[ZH - India just announced it would reduce tariffs and 'swap' its gold with the Bank of England - expectations that reduced tariffs would not bring back demand for India gold are baseless and the swap itself will be swallowed by a market desperate to transfer paper to physical. On a side note Gold ETF physical holdings are rising once again]

* ...And easing geopolitical tensions
Third, geopolitical tensions have been providing a strong boost for gold prices so far this year. Gold's safe haven appeal has been driven, among other factors, by continued violence in Iraq and the tense situation in Ukraine. However, once geopolitical tensions start easing, gold is likely to come under pressure.

[ZH - Easing geopolitical tensions?!!! Like Ukraine's cessation of the cease-fire, like Kuwait's burning, like Iraq's turmoil?]

In the near term, it is possible to see gold prices edging even higher, as it will continue to benefit from geopolitical risks. The recent news that Singapore is planning to launch the first exchange-traded physically-backed gold kilobar contract in September has also provided additional boost to gold sentiment. However, without firm support from the physical market and in light of additional signs of economic recovery in the US, we are likely to see gold's current rally falter sooner than later.

[ZH - so, in summary, SocGen thinks the trends that are supporting gold strength are all false or ending and, no matter what, their prediction of lower gold prices must hold - or else the entire dream of the return of the status quo is over]

*  *  *

Perhaps we should forward this report to SocGen's Robin Bhar...

In Gold We Trust Report 2014

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Bay of Pigs's picture

Tradition bitchez!

kliguy38's picture

How can you even THINK that a Bank as important as Soc Gen would purposely mislead a gold investment community with disinformation????Next thing you know you'll tell me that Warren Buffet is lying pastry eating pediflile.

GetZeeGold's picture



Where's Germany's gold again?

Thomas's picture

Who knows if it is a hit piece? The authors could just be complete idiots. There's a bull market in those lately.

AlaricBalth's picture

Aug. 23, 2011 (EIRNS)—"In a desperate move to avoid further collapse, Inter-Alpha giant Société Générale, France's second-largest bank, whose shares have dropped by 44% since the beginning of the month, signed a one-year, automatically renewable, "liquidity contract" on its shares with Rothschild & Cie., which mandates Rothschild to trade SocGen's stock to avoid excessive price swings, according to a note posted on the bank's website.

Liquidity contracts of this type are often used by medium-sized corporations, but the participation of a bank the size of Société Générale is seen by all as a move of desperation. The reality is that they're not volatile—they're just sinking."

SocGen bailout by the Rothschilds. Currently still in effect.
Is there any doubt as to the purpose of the SocGen gold report?

Cui bono...

GotGalt's picture

AlaricBalth - I'm surprised no one else has up arrowed your post.  That is a very interesting find, first I've read of it.  May we live in interesting (and rigged) times...

Squid-puppets a-go-go's picture

ok, but remember - does anyone really think that the rothchilds have divested themselves of their generations-old gold stockpiles?

bear in mind at all times that this jawboning down of gold continues only until the likes of the rothchilds decide its time to flip the switch

RaceToTheBottom's picture
SocGen is a barbarous relic.
ilion's picture

I wonder if anybody actually pays for these full-of-shit "research" reports?

Joebloinvestor's picture

Sounds like whistling past the graveyard.

Seasmoke's picture

FACTS do not matter

xamax's picture

What is funny is:
Soc Gen will start be bullish on Gold when it will hit 2'500.

adonisdemilo's picture

@ xamax,

I doubt it, the dumbfucks will still be trying to talk it down.

What kind of "investor" takes any notice of them anyway with a modus operandi of " five for me and one for you, perhaps."

adonisdemilo's picture

Bull shit is very cheap, and it stinks.

CCanuck's picture

Enormous Global Surplus of BS....all-you-can-eat for dollar.

cowdiddly's picture

Now why would I want to listen to a gold report from Germany or is Austria. I can't keep up with your little tax haven scam nor would I trust anything that comes out of one. Or do you consider yourselves Swiss? Again STFU lowly Russia has more than you cheese eaters without the benifit of your crooked Swiss banks . Last I heard Germany does not have any gold or maybe 5 tons or so. Please step down  on the list of gold holding nations to about 30th place  with Ubekistan please so real owners can discuss this.

Sincerely Cow.

BobTheSlob's picture

R those yer daughters? We can lease them likes godz if you want.

JD59's picture

Just keep buying and stacking physical. Preicous, and others.

Cacete de Ouro's picture

SocGen maintains short positions on gold i.e. Central banks such as Bolivia have put gold out on deposit with a number of bullion banks and SocGen recently took over some of these gold deposits.

Latitude25's picture

Link to the Bolivia info please.  My daughter works for the Central Bank in La Paz and I've never heard that from her.

agent default's picture

SocGen knows that gold will be raided in the usual fashion and raided hard.  They obviously can't say that so they come up with all sorts of nonsense to justify their warning.  The bottom line however is that someone is about to sell 50000 contracts in three seconds via a market access account during Globex closing hours.

apberusdisvet's picture

To all of you who read  AND BELIEVE the garbage put out by Soc Gen, Goldman et al, please return to 5th grade and this time, please, please try to graduate.

Meat Hammer's picture

Facts, schmacts. My dollar bill says "America" on it so that means it's fucking badass!! Gold coins are just fancy dollar bills, carried by flashy homos, and hoarded by people who don't support the troops and their ability to pummel any fucking diaper-head who thinks he's gonna replace the petro-murica-dollar with a goddamn rock!

I will now belch The Star Spangled Banner.

Winston Churchill's picture

I can fart it, whilst belching God save the Queen.

I'm ambidextrous as well.

AuEagleNest's picture

Dang! Just tried to fart the tune and shit my pants.

MeelionDollerBogus's picture

So, you did an economic summary of the USA instead of the song?

Vint Slugs's picture

"......[ZH - actually the Chinese commodtity-financing-deals implies gold strength as forward/future hedges are unwound driving prices up and wagging the spot market's tail higher]..."



If futures hedges, say short positions on Comex, were being lifted then total gold open interest should be decreasing: old shorts buying from old longs.  However, total gold open interest has increased from a May 29 low of 374,035 to a high-to-date on June 2 of 406,558.  Clearly, those numbers imply new longs and new shorts entering the futures market.  [Respective numbers in silver went from 158, 445 to a June 19 high of 166,025 and are presently back to 159,216 so no similar inference re silver.]

AllWorkedUp's picture

I suppose all that could be true if you buy the bullshit coming out of the CME.

MeelionDollerBogus's picture

The Corporate Manipulation Exchange?
They wouldn't dare!

BobTheSlob's picture

Lotz of very very angry "I bought gold at 1900" retards here. If you had a clue you wouldn't be angry.

GetZeeGold's picture



Yeah....but some of us bought it under 300....we're pretty happy about it.


Member for 3 weeks 4 days

Welcome to Fight Club bitch.

SoberOne's picture

Oh man I wish I was in under 300... but im a stacker, so I don't fret it. My latest entries I am pleased with.


Fight Club

MeelionDollerBogus's picture

#1 people can hedge short with options & no margin
#2 won't matter when gold is unattainable
#3 don't be tempted to sell at gold $3000, it will be a trick & that fiat will get little. Get USLV if you must as it is currently 2.913x vs silver & silver is 2x vs gold (gold/silver^0.5 = 285 trend, around 289 right now).
Don't be a sucker.

hibou-Owl's picture

Chart of GLD.
large retracement from sept 11 high, very strong bullish divergence on the Jan 14 low(monthly timeframe), and currently have inverse head n shoulders pattern with neck line break at 1310.

The chart shows a short term bearish divergence, which turned down 7/2/2014, My estimation of the time to break the neckline after this pullback 3 to 4 weeks. Look for possible scare in the markets around this time, don't know what but something brewing.
To get all these patterns aligning so strongly is not common.

One the other side the S&P500 chart heading for bearish divergence currently, if we get an inside day or couple of black candles. It could come back to 1925 and still not break current trend. The spring is compressed.

MeelionDollerBogus's picture

Immaterial. The strength is not in the fiat price but the tonnage sought, moved & fought for using heavy military equipment.