Goldman: "Stay Long Gold"
For what it's worth, Goldman likes gold. "Consumers: We expect gold prices to continue to climb in 2011 given the current low level of US real interest rates. Further, with our US economics team now forecasting slower US economic growth in 2011 and 2012, we expect US real interest rates to remain lower for longer, supporting higher gold prices through 2012. Consequently, we recommend near-dated consumer hedges in gold through 2012. Producers: With gold prices expected to continue to climb through 2012, we find hedging opportunities less attractive for gold producers at this time." In other news, Goldman also likes Silver, Copper, Zinc, WTI and Brent. In other words: QE3 is coming.
Details on Gold...
Rolling long Gold: Buy December 2012 COMEX Gold (initial value of $1,800.5/toz, current gain $423.9/toz)
We expect gold prices to continue to climb in 2011 and 2012 given the current low level of US real interest rates, and as a result recommend a long gold position. With expiration approaching, we are rolling our outstanding long Dec-11 COMEX gold trade recommendation, entered on October 11, 2010 with an initial value of $1,364.2/toz and a current gain of $423.9/toz, into a long Dec-12 COMEX gold future position with a reference price of $1,800.5/toz.
Over the long run, silver prices tend to track gold prices. Thus, our silver forecast reflects the historical ratio to gold.
Long Copper: Buy June 2012 LME copper (initial price $8,804/mt, current loss $1,153/mt)
Although our long copper position opened in May 2011 remains substantially under water, our 12-mo copper price target of $9,500/mt suggests substantial upside from current depressed levels. We caution that concerns about the European sovereign debt problems and slowing economic growth are likely to continue to overhang the market in the near term. However, we emphasize that EM-led global economic growth, combined with material disappointments in copper production on weather disruptions, labor unrest and declining ore grades, suggest a continued deficit in the copper market in 2012. Further, we maintain that a potentially powerful upside catalyst still largely lies ahead in China should policymakers convincingly shift to an easier stance and/or should lower prices increasingly entice Chinese buyers back into the market. Thus, we continue to recommend establishing long positions in copper, especially on sentiment-driven short-term dips.
and this being Goldman, of course, Brent and WTI:
Long NYMEX WTI December 2012 contracts (initial price $90.79/bbl. Current gain $5.93/bbl)
We recommend a long position in the NYMEX WTI December 2012 contract, as the clearing of the surplus at Cushing has reduced the risk of breaching the storage capacity at Cushing and we expect the upcoming rail capacity that comes on line in 1H12 to help clear the crude oil surplus in the Midwest, pushing WTI prices closer to Brent prices.
Long ICE Brent July 2012 position (initial price $105.16/bbl, current gain $2.93/bbl including loss on original position of $1.95/bbl).
We have pulled the long position in the ICE Brent December 2012 contract forward. With the timespreads in Brent now moving more with concern over European debt than prompt Brent crude oil prices, the ICE Brent July 2012 position is closer to the tight physical crude oil markets which we expect will be less affected by flare-ups of concern over European debt, and which we expect will tighten further in 1H12.