Goldman Goes Schizo On Gold: Boosts Price Target To $1200 Even As It Is "Selling It With Conviction"

Tyler Durden's picture




 

Back in the beginning of 2014, Goldman loudly predicted that 2014 would be the year of normalization: the economy would grow by 3%, the S&P 500 would barely rise to 1900, and gold would tumble to $1066. By now it goes without saying that it has been dead wrong about the first with the economy set for a contraction in the first half of 2014 and the full year assured to have the worst GDP growth since Lehman, wrong about the second with the market now so clearly disconnected from any economic fundamentals nobody even pretends that it is anything but the Fed manipulating a rigged stock market, and has been painfully wrong about the third.

So with less than 6 months to go until the end of the year, with various gold ETFs suddenly seeing the biggest buying in years, and with gold continuing to outperform most asset classes YTD, what is Goldman to do? Why follow the trend of course, and just like David Kostin had no choice but to boost his S&P 500 price target using the idiotic Fed model as a basis, so earlier today Goldman just upgraded its gold price target from $1,066 to $1,200. Probably this means that after accumulating it for the first half of the year, Goldman is finally preparing to sell the precious metal. Not so fast: because while Goldman did just raised its price target, it continues to have a Conviction Sell rating on Gold, which is its second most hated commodity after iron ore. Go figure.

So without further ado, here is Goldman going full schizo.

Conviction views: Bearish on iron ore, gold and copper, bullish on nickel, zinc, aluminium and palladiumIn gold, we raise our LT price forecasts to $1,200/oz in $2014 terms from $1,066 earlier. Over long time horizons, the gold price has been relatively stable in real terms, keeping pace with inflation. Accordingly we use a flat real gold price forecast assuming gold is an effective inflation hedge and increase in nominal  gold prices should offset the impact from inflation. We believe iron ore (-21%), gold (-20%) and copper (-12%) are the mining commodities with the greatest downside on a 12-month view.

* * *

 

We have updated our long-term real gold price forecast to $1,200/oz in $2014 terms (was $1,066/oz) to make it more in-line with our marginal cost support level, see Exhibit 66. Currently gold is trading at a 9% premium to our LT real (inflation-adjusted) forecast but we believe on a long-term basis the price should revert back to the cost support level in-line with our estimates.

 

 

Marginal cost support at $1,200/oz level

 

In our view, the 90th percentile of all-in sustaining costs (defined as total by-product cash cost plus royalty expense, plus sustaining capex, exploration and corporate expenses) provides a good estimate of the floor price for gold, as it is the breakeven level for the marginal producer. At times of extreme declines in demand, it is possible for prices to fall below the marginal cost support level; however we believe such events are generally shortlived. Exhibit 67 shows our latest 2014 gold’s all-in sustaining cost curve.

 

 

Gold price relatively stable over the long term

 

Over long time horizons, the real gold price has been relatively stable, keeping pace with inflation. Exhibit 68 illustrates that the real price of gold was fairly constant until the early 1970s, after which it became highly volatile. Although the real price has experienced significant volatility post the 1970s, we highlight its tendency to a mean reversion trend. The real gold price fell back to the 1950s level in 2001 after peaking in 1980, and it is currently in decline again after peaking in 2011.

 

Where things get downright bizarre is the last paragraph where either Goldman had a humongous typo or merely pulled the boilerplate language from a prior report where for some inexplicable reason Goldman says it has a "$1050" price target even as the table above clearly says $1,200. Oh who cares: this whole report is merely for the benefit of Goldman's prop desk, which is clearly ramping up trading, to do the opposite of whatever Goldman's few remaining clients are doing.

We continue to remain bearish on gold in 2014

 

We expect gold prices to drop to $1,050/oz by the end of 2014, maintaining our previous forecast. Acceleration in the US economic recovery story remains the key driver behind our lower gold price forecast. While weak economic data due to cold weather and the onset of the Crimea crisis led to a sharp rally in gold prices between January and mid-March, sequentially better US activity and easing tensions pushed gold prices lower by early April. Since then, US economic releases have continued to point to acceleration in growth while tensions in Ukraine have escalated, keeping gold prices range bound near $1,300/toz.

Sure, why not.

That said, can Goldman please also advise if its suddenly very active prop group is buying or selling gold. We promise to do whatever they are doing.

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Wed, 07/23/2014 - 20:47 | 4995980 James Dandy
James Dandy's picture

Aren't Jews something?

Wed, 07/23/2014 - 20:54 | 4996010 Deathrips
Deathrips's picture

A heart felt FUCK YOU GOLDMAN!!!

 

RIPS

Wed, 07/23/2014 - 21:08 | 4996062 cifo
cifo's picture

Are there still muppets listening to them?

Wed, 07/23/2014 - 21:11 | 4996077 kliguy38
kliguy38's picture

muppets will never fail to deliver. They are very loyal

Wed, 07/23/2014 - 22:04 | 4996302 Leonardo Fibonacci2
Leonardo Fibonacci2's picture

James Dandy wrote "Aren't Jews something?"

They sure are & they deserve a free pass to the Auschwitz Dance Club

http://www.spiegel.de/international/world/dancing-auschwitz-holocaust-su...

Wed, 07/23/2014 - 22:56 | 4996497 knukles
knukles's picture

What the fuck did Goldman just write?  I found it nigh incomprehensible.
As the chosen would say, "Yadda Yadda Yadda"
Or New Yorkers, the most unhappy people in the world

Thu, 07/24/2014 - 02:15 | 4996889 Pinto Currency
Pinto Currency's picture

 

It's not the production cost of gold that drives the price, it is the availability of gold vs the demand.

Gold is less than 1% of available financial assets while there are $200+ trillion of global debt denominated in mere paper money.

http://blogs.wsj.com/economics/2013/05/11/number-of-the-week-total-world-debt-load-at-313-of-gdp/

Thu, 07/24/2014 - 06:15 | 4997104 0z
0z's picture

"2014 would be the year of normalization: the economy would grow by 3%"

Anything over 1% growth per century is NOT normal.

Thu, 07/24/2014 - 07:33 | 4997205 BigJim
BigJim's picture

 What the fuck did Goldman just write?  I found it nigh incomprehensible.

More to the point: what the fuck did Tyler just write?

so earlier today Goldman just upgraded its gold price target from $1,066 to $1,200. Probably this means that after accumulating it for the first half of the year, Goldman is finally preparing to sell the precious metal. Not so fast: because while Goldman did just raised its price target, it continues to have a Conviction Sell rating on Gold, which is its second most hated commodity after iron ore. Go figure.

Apart from the fact that Goldamn routinely lie through their teeth - if gold is trading around 1300 now and they think it'll go to 1200, why the fuck wouldn't they recommend selling?

Thu, 07/24/2014 - 02:53 | 4996942 sessinpo
sessinpo's picture

James Dandy   Aren't Jews something?

----

And they control you. Aren't you dandy?

Thu, 07/24/2014 - 06:40 | 4997121 CharlesBronson
CharlesBronson's picture

ADMINS - THIS IS A RACIST COMMENT TOSS THIS IDIOT OFF THE BOARDS PER YOUR OWN REGS

Thu, 07/24/2014 - 06:40 | 4997124 CharlesBronson
CharlesBronson's picture

ADMINS - THIS IS A RACIST COMMENT TOSS THIS IDIOT OFF THE BOARDS PER YOUR OWN REGS

Thu, 07/24/2014 - 06:40 | 4997125 CharlesBronson
CharlesBronson's picture

ADMINS - THIS IS A RACIST COMMENT TOSS THIS IDIOT OFF THE BOARDS PER YOUR OWN REGS

Wed, 07/23/2014 - 20:50 | 4995993 highly debtful
highly debtful's picture

To each his own: Goldman can continue to invest in all sorts of exciting derivatives, while I'll stick to buying deep lakes in the heart of Switzerland and recreational boats of very poor quality. 

Wed, 07/23/2014 - 21:10 | 4996075 cifo
cifo's picture

Be careful with some lakes in switzerland, they may not allow your boat on them.

Wed, 07/23/2014 - 20:56 | 4995999 TeamDepends
TeamDepends's picture

Friend, do you want to own paper gold? Sacs 'o Gold can help...

Wed, 07/23/2014 - 20:59 | 4996012 Dr. Engali
Dr. Engali's picture

Gold will never see $1,300 again.

~ Morgan Stanley.

Acceleration of the economic recovery is key? How long before you gut your forecasts.......... again? When you do I fully expect you to raise your gold price target...... Not!

Wed, 07/23/2014 - 21:12 | 4996087 Elvis the Pelvis
Elvis the Pelvis's picture

There's no hope for gold.  Deflation is here to stay.  Learn it, live it, love it.  Bitchez.

Wed, 07/23/2014 - 21:18 | 4996106 Pheonyte
Pheonyte's picture

That's what they said when I bought it at $850. Then I blinked and it was up 100%.

Wed, 07/23/2014 - 23:22 | 4996586 techstrategy
techstrategy's picture

Deflation with respect to what?  In a closed system, something must inflate as something else deflates...  Real assets will inflate.

Thu, 07/24/2014 - 02:59 | 4996953 sessinpo
sessinpo's picture

techstrategy   Deflation with respect to what?  In a closed system, something must inflate as something else deflates...  Real assets will inflate.

----

So explain the Great Depression. That was even a more closed system then today. And in that time period, assets declined as people had to sell them to service debt.

Yea, we see massive printing. But what we are really seeing is massive debt creation - big difference.

Thu, 07/24/2014 - 04:01 | 4997019 heavy.metal
heavy.metal's picture

So you're basically saying Yellen is gonna work her ass producing something of actual value to the real economy so that the Fed can purchase back all the debt they have created? This would give some real value to those FRNs indeed.

If not Yellen, then I guess somebody else will do it. Will you? Well I hope so, because I sure as hell didn't sign up for it.

 

Thu, 07/24/2014 - 07:41 | 4997237 BigJim
BigJim's picture

 techstrategy   Deflation with respect to what?  In a closed system, something must inflate as something else deflates...  Real assets will inflate.

----

So explain the Great Depression. That was even a more closed system then today. And in that time period, assets declined as people had to sell them to service debt.

Yea, we see massive printing. But what we are really seeing is massive debt creation - big difference.

Wrong, wrong, wrong. Not all assets. What happened to the value of gold - and gold equities in particular - during the Great Depression?

Thu, 07/24/2014 - 06:01 | 4997097 tradewithdave
tradewithdave's picture

Since when is the zero lower bound a closed system? Cue Ross Ashby and the coastal paradox.

Thu, 07/24/2014 - 13:53 | 4999310 MeelionDollerBogus
MeelionDollerBogus's picture

Stay? Deflation hasn't been near happening since what, the 1930's?
If you think you're seeing deflation now or coming, I see you drinking a 2 litre bottle of LSD soda.

Also, your blog sucks.

Wed, 07/23/2014 - 22:19 | 4996353 DirkDiggler11
DirkDiggler11's picture

Great link Fonz, thanks for posting, I had not heard of this fund yet,. Nice of someone to give Sprott a run for his money.

Thu, 07/24/2014 - 09:16 | 4997481 zeroheckler
zeroheckler's picture

A whopping 54 ounces were delivered!

Wed, 07/23/2014 - 20:59 | 4996027 logicalman
logicalman's picture

Sachs of Shit.

 

Wed, 07/23/2014 - 21:10 | 4996064 AL_SWEARENGEN
AL_SWEARENGEN's picture

Just picked up some 1/10 oz eagles today.  Cocksuckers are tiny but they're shiny!

Wed, 07/23/2014 - 21:45 | 4996216 Quus Ant
Quus Ant's picture

If I owned any gold, which I don't, I would prefer pesos.  They're cut with copper so they'll stand up jingling around in your pocket.  And Coyotes recognize them.  In case you need to get across the border.  Ya know.  When they stop letting people in (out).

Thu, 07/24/2014 - 06:27 | 4997112 Latitude25
Latitude25's picture

Exactly.  Not popular in the US but Latin America thinks they're A+.  My LCS doesn't value them much and sells the 50 peso for $25 over spot.

Wed, 07/23/2014 - 21:10 | 4996079 Seasmoke
Seasmoke's picture

I hope Lloyd fucking chokes on Gold. 

Wed, 07/23/2014 - 21:14 | 4996091 Pheonyte
Pheonyte's picture

May he be fed molten gold in hell,

Until his belly and throat burn into ashes.

Wed, 07/23/2014 - 21:50 | 4996239 logicalman
logicalman's picture

I wouldn't be that nice to him.

Wed, 07/23/2014 - 21:39 | 4996192 Government need...
Government needs you to pay taxes's picture

Have the rapacious wolves @ Goldman Sachs discovered a new scam for ripping muppets eyes out?  I wonder what the derivative play is.  I'd be long physical, and look to get short the fiat-backed derivatives . . . with some amount of time lag.

Wed, 07/23/2014 - 21:46 | 4996227 alexcojones
alexcojones's picture

Why do so many Jewish guys named Goldman and silverman, denigrate Gold and silver?

Seems kinda anti-Semitic toward shiny metals.

 

Thu, 07/24/2014 - 03:09 | 4996970 sessinpo
sessinpo's picture

alexcojones    Why do so many Jewish guys named Goldman and silverman, denigrate Gold and silver?

Seems kinda anti-Semitic toward shiny metals.

----

Quite frankly, I don't endorse the worship of money in any form. 

Thu, 07/24/2014 - 06:41 | 4997126 CharlesBronson
CharlesBronson's picture

ADMINS - THIS IS A RACIST COMMENT TOSS THIS IDIOT OFF THE BOARDS PER YOUR OWN REGS

Thu, 07/24/2014 - 13:50 | 4999291 MeelionDollerBogus
MeelionDollerBogus's picture

Yer the rayciss! Calling for gold and silver genocide

Wed, 07/23/2014 - 21:54 | 4996232 billsbest
billsbest's picture

We're sticking with Nixon and his $42.22. $35 was just not realistic. Silver at $1.29 is a sell. Understand these are projections are just pulled from the air, and no diametrics on the numbers yet. Bobby Copperman (anti-gentilic)

Wed, 07/23/2014 - 21:51 | 4996240 blindman
blindman's picture

perhaps a flaw but i tend to ignore anything
associated with that particular crime syndicate
even though they pay many of their employees
very well, every statement stalls at the
trust threshold.

Wed, 07/23/2014 - 21:52 | 4996252 logicalman
logicalman's picture

When the dollar is worthless, what will the price of gold be?

 

Wed, 07/23/2014 - 21:58 | 4996271 billsbest
billsbest's picture

20 Morgan dollars.

Thu, 07/24/2014 - 03:14 | 4996976 sessinpo
sessinpo's picture

logicalman    When the dollar is worthless, what will the price of gold be?

----

Well, historically, I imagine the world will do the same thing it has done in the past. It will create a new currency reserve and reset the system. Those that were in debt will be wiped out. Gold will simply fluctuate based upon the new currency.

Thu, 07/24/2014 - 13:48 | 4999281 MeelionDollerBogus
MeelionDollerBogus's picture

250 to 350 loaves of bread per ounce (troy).

Wed, 07/23/2014 - 21:57 | 4996272 techstrategy
techstrategy's picture

Someone sold lots of August and September GLD puts today... Nice timing GS!  They can accumulate on the takedown without everyone realizing what v they are doing...

 

People, you can end the games forever simply by selling all float scams (NFLX, AMZN, etc) and their promises if earnings/returning cash to shareholders next decade into cash and gold today.  Sell the underlying in float scams to buy FRN and gold (or GLD because new basket creation creates indirect physical demand).

Wed, 07/23/2014 - 22:01 | 4996286 alexcojones
alexcojones's picture

Logic, "When the dollar is worthless," gold will be priced in silver, brass, lead, gasoline, spam, and pussy.

Wed, 07/23/2014 - 22:30 | 4996386 Saltaire
Saltaire's picture

It appears gold is being run down. As equites are overheating there is fear assets will move to gold so expect a very intense campaign to push gold down durring the transition period.Once rates are raised the pressure will be off as money from equities will be herded into treasuries. What happens after the market tanks and rates are raised?

Wed, 07/23/2014 - 22:45 | 4996458 Oscar
Oscar's picture

Just posted a free technical analysis on gold.

www.goldsqueeze.com

Do NOT follow this link or you will be banned from the site!