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Goldman: It's The Central Banks' Fault We Can't Be More Bearish On Gold
We've heard it all: snow, cold weather, hot weather, non one-time recurring, "one-time, non-recurring" charges, and even Bush. But when it comes to "excuses" for why one is wrong, this morning Goldman's note "Central banks stall a more bearish gold outlook" absolutely takes the cake.
That's right: Goldman just blamed central banks for being unable to be "more bearish" on gold.
While readers let that sink in for a bit, here is the jist of Damien Courvalin's note.
Even more monetary stimulus has helped support gold prices…
While gold prices have trended lower since mid-2013, the decline has been short of our expectations. Recently, the combined support of: (1) weaker-than-expected US economic data; (2) the run-up to the announcement of QE in Europe; and (3) the surprise SNB decision to remove the CHF/EUR cap, have seen prices rise to near $1,300/toz. While we believe that these catalysts are now mostly priced in, and that gold prices will decline in 2015-16, we are nonetheless raising our near-term forecast to current prices.
Wait, so infinitely diluting fiat money and paper claims on wealth, a process which inevitaly ends up with the paradropping of bales of cash, is favorable for hard, "traditional" stores of value? Do go on...
…but the start of the US hiking cycle is drawing near
We expect the decline in gold prices to resume from 3Q15, with the start of the US rate hiking cycle. Accordingly, we revised our 3, 6- and 12-month gold price forecasts higher to $1,290/toz, $1,270/toz and $1,175/toz but our year-end 2016 forecast lower to $1,000/toz. While our near-term conviction in lower gold prices has declined, our confidence in lower gold prices in the long-run has increased on the back of lower expected inflation in coming years and a declining marginal cost of gold production.
Actually Damien, your own team at Goldman wrote on Friday that " We continue to expect a later-than-consensus first hike, with September remaining our baseline but the risks looking increasingly tilted to the later side" so it may be time to re-evaluate that whole "drawing near" assessment considering it is in fact being pushed further back!
Continuing:
Lower oil prices and USD strength to relieve mining cost pressures
Based on our cost curve modelling, we estimate that lower energy prices and USD strength have brought the “all-in” marginal production cost down $150/toz to $1,050/toz and that this move will be persistent. We also recognize that as we move further into the Exploitation phase of the commodity cycle, additional cost deflation forces are likely to emerge, such as wage deflation, increasing labor and capital productivity and a faster pace of technological (TFP) growth, leaving risk to our new long term gold price forecast of $1,050/toz skewed to the downside.
Oh, so lower crude prices are a disaster for crude producers but a gift for gold miners: gold miners the bulk of which are located in various third-world nations, where crude "trickle-down" economics works every time, all the time, and where striking miners are never on edge about the possibiliy of extracting even the smallest of wage concessions in a world in which some fixed cost is unexpectedly reduced. Got it.
Cost deflation, rising supply and higher real rates all intertwined
Importantly, while our cost-deflation work focuses on gold as a mined commodity, the drivers of this cost deflation are directly tied to the anchors of our cyclically bearish gold view. It is not a coincidence that the outperformance of US growth – enabled by the Shale revolution and driving gold prices lower – is occurring with a strengthening of the US dollar and amidst lower energy prices as the dynamics are very much self-reinforcing. We would further expect that the higher rate environment that will drive gold prices lower will ultimately drive gold production higher.
Ok, that really went over our heads, but with $1.4 trillion in European government debt having gone to negative interest rates since the ECB's announcement of NIRP in June...
... just which "higher rate environment" are we talking about here?
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And this surprises them? They are seriously surprised? I am pretty sure Peter Schiff is speaking English.
Yea, I didn't think just anybody would bend over for the Brits, musta been a special case.
In the true spirit of "Muppetology", this means that the Squid is buying every single ounce of Gold it can get its tentacles a round. So sell, Muppets, sell, sell sell.........
Because Obama.
NIRP just can't come fast enough for these guys
Great. Now I'm getting all sorts of anal Muppet insertion porn ads.
"Live Goldman Rapings" and the like....
Jeeeesh....
Is it just me or was that piece somewhat close to incomprehensible?
Goldman now bearish gold?
Time to go all-in long!
"…but the start of the US hiking cycle is drawing near, we expect the decline in gold prices to resume from 3Q15, with the start of the US rate hiking cycle"
Since rates aren't going up, ever, and in fact interest rates are going negative, their conclusion is nothing more than muppet stomping BS.
"our confidence in lower gold prices in the long-run has increased on the back of lower expected inflation in coming years and a declining marginal cost of gold production."
The rate of gold production hardly influences the price of gold. All of the gold ever mined still exists somewhere. It is exactly the opposite. The price of miners will increase, with a lag, after gold goes up.
It's not just you knuks.
I totally agree, Maltese, you should never take advise from a company that was selling securities to its own customers, really talking them up, then turning around and shorting tho
Agreed, Maltese, also, Goldman is not on our side. I'd never take investment advice from a company that sold securities to its own customers and then turned right around and shorted those very securities. God's work my ass. The more they bash gold the more they're buying for themselves.
<deleted>
haha the goatse.cx reference :)
thank you for reminding me of that horrible reference
green arrowed!
I don't know if Goldman and or Chase has the same amount of power over gold prices as before. Other players are getting stronger...
As the physical metal continues to be bought by wary people and overseas, I just don't see how prices can be suppressed forever. Markets will develop around the regular system if demand rises enough. The "official" spot price may just end up getting ignored in a genuine crisis. But Russia and China love the low prices, and will continue to buy until this comes about. I think they are being careful about the rate that they dump T notes, so as not to run the price up... yet.
in light of current world events this bearish on gold analysis is disonant, ignorant and disingenuos.
"Exploitation phase of the commodity cycle..."? Can't say it any plainer than that.
We Can't Be More Bearish On Gold
Goldman huh?
So how much gold do the English have left to sell?
So is this what a Haaaavaard education gets you today ?
The capacity to fling rather obvious & pathetic b.s. ?
Harvard and the whole Ivy League is just a bunch of effete elitist assholes. They've always been that way, but their fascist elitism is more extreme and obvious than ever
"We would further expect that thehigher rate environment that will drive gold prices lower will ultimately drive gold production higher."
So just like lower oil prices will drive oil production higher???
No one is raising rates expecially Mr. Yellen.
they are really surprised !!!!!!! spread your legs Bitchez !!!
That Kermit photo is disturbing. Reminds me of a porn called Gaper Capers.
Left out Miss Piggy holding the dildo
Some here may be old enough to remember goatse.cx.
don't need to be old, just need to have joined the net early
when pictures used to take a coffee break to load, those were the days
we assed some folks
But...they are doing God's work. Who ever that God is I have no idea.....
Thier view of God is that the heathens misspelled Goldman.
Mamon.
Ba'al.
Have you ever seen "The Cabin in the Woods"?
This message made possible by Trojan, Stolper, and the Letters FU
Goldman speaks with forked tongue.
What was the 7:45 disturbance in the farce? Crude jumped 2%, everything moved...
I guess there isn't much physical left for them to grab.
Where is Krugman now to bless Syriza with his benediction.
After all, SYriza is all for government and infrastructure spend; aka Superkrugmanism; upon the condition that the ECB takes the Banks and the Casino (derivative cake) OUT of the loop, only lending to governments via their central banks. And... that there is some debt jubilee of this Oligarchy imposed debt on greek people which went from 160 Billion euros in 2009 when crisis began to 370 billion E during the BAIL OUT....
Holy jumping Josaphat; all to feed the big banks !
In effect, this proposal if accepted in toto would make the ECB de facto federal.
And that....is not part of the current construct, whence Benoit Coeure, French bank's spokesman on the ECB board, who now howls like a hungry wolf on the prowl : If you don't pay us back we don't BAIL you out for your liquidity next month.
You can see the banks now start to panicking in heartland Europe.
If Greece is the grease that lubricates the european revolt, tremble Banks of eurozone, as cauldron bubbles !
Last I heard it was 1st qtr 2015 for rate hike, Then it was summer, Now late 2015 into 2016. Love to see them do it with dollar at 95. Nothing like 100 with a flat economy. China would surely de peg also. Guess some of this is aimed at Putin. Cant have someone trying to back a currency with real money.
Seems like it is past time for Gold to say, I CAll.
Booming SGE gold withdrawls for 2nd week of 2015 at 70 metric tons.
https://www.bullionstar.com/blog/koos-jansen/booming-sge-withdrawals-in-...
Join them or follow Kermit above.
It used to be Bush's fault but now it's Putin's fault.
Because Obama.
>>>
It's The Central Banks' Fault We Can't Be More Bearish On Gold
<<<
Actually, entirely correct.
CB's were the last major buyers.
But because they do not have a funding cost, and paid 100%, they can hold their (substantially losing)
positions until 'the price recovers'. Or maybe some domestic politics intervene.
In any event, the usual discipline of being promptly forced out of your losers does not apply,
so the market price will stay higher for longer than it would otherwise.
Watson
Good and fuck yourself GS, it's not ALL central bank faults. It's partly your fault. It's GS that over short sells the Central banks loan gold even though they TOLD you not to. Then the central bank was forced to sell even more gold to rescue/cover your shorts.
So go and fuck yourself.
Nice to see ZH using the picture I've been posting around here for awhile. Pretty much sums it up for the muppets.
Indian physical gold demand is a force of nature that you can count on like the sun every day.
Which could explain Punk and Mooch being in india right now. What do you want to bet Mooch stays out of Saudi? If they did a pecker check there would be no trial.
They should have had their visa application turned down like Modi before he was PM
Just another poor soul who has lost the concept of the word "trillion". What I'd like to know is what qualifies these bizzaros for these job positions in the first place? Was it the "BS" degree, or the "MS "(more sh_t) degree? Perhaps the "PhD" (piled higher and deeper)?
It's The Central Banks' Fault We Can't Be More Bearish On Gold.
I know it's early and I am a bit hung over. But am i the only person who notices that can be read Both Ways ?
Goldmanites are book learned 'business' majors who know nothing about actually running an oil well or gold mine. Everything they say us couched in hidden terms of wanting more QE forever.
Thank you ZH for demonstrating what a load of nonsense these bank predictions are.
im sticking with the bush theme. until our exalted furher tells me otherwise or i hear on msnbc
"While gold prices have trended lower since mid-2013, the decline has been short of" Blah blah blah...
Gold was $1250 in mid 2013, there was no further decline other than a little noise. Why do these bankers waist time on gold when they all agree it has no investment value?
Fear. When you're in cahoots with the Fed, you have to minimize, squash and acquire any threat to control.
A contrarian's wet dream!
They're right. With no CB the dollar would be 400+ grains of silver and gold would be 23 of THOSE dollars an ounce.
But that ain't what they mean, so while they're right, they're still wrong. I'm giving myself a headache.
'Get outta my face, please...'
I can think of trillions of reasons to completely ignore the Vampire Squid on their constant bearish gold outlook.
The effect of gold mining costs on the price of gold is precisely zero. An analyst basing his analysis of future gold price trends on the cost of mining gold simply does not understand the gold market. All the gold ever mined still exists, annual gold production amounts to a mere 1.4% of the total supply. Even if ALL gold mining were to suddenly cease tomorrow, it would only have a marginal effect on the gold price. The fact that some of the variable costs of mining gold have recently declined is only relevant to the profit margins of gold miners.
I'm not surprised with Goldman because this hits the same level of insanity as the trading predictions based on moon phases and astrology etc.Who the hell believes this horseshit?