Stay Long Gold

Tyler Durden's picture


As gold pulls back under $1700, back to 6 week lows (and Silver collapses in its high beta way, reverting back in line with Gold), Morgan Stanley says 'Stay Long Gold'. The recent sell-off notwithstanding, they remain bullish through 2012 and while the current USD strength is a headwind, they expect aggressive Fed action (and other global central banks), including the likely adoption of QE3 in 1H12, to be gold positive. Deciphering the demand and supply dynamics, they forecast prices to rise on a quarterly average basis through 4Q13 as the four pillars of their bull market thesis persist.



Investor Demand

  • In our view, the timing of the sell-off in late December suggests strong selling pressure linked to year-end book squaring, portfolio adjustments and commodity index reweighting. Furthermore, the sell-off also coincided with an especially sharp rally in the TWI of the USD, a strong headwind for gold given its USD pricing and quasicurrency function.
  • While we expect European funding stress to continue in early 2012, recent coordinated actions by six central banks and separate actions by the ECB suggest that non-gold related measures to ease access to USD swaps will be successful, reducing downside pressure on the gold price.

Consequently, gold prices will again depend on whether the four pillars of the original bull market persist:

  • (i) decline in producer hedging (and potentially de-hedging as a positive demand factor);
  • (ii) the decline of DM central bank sales and rise of EM central bank purchases;
  • (iii) the inability of gold mining companies to increase gold supplies materially; and
  • (iv) long-term growth in physical investment demand.





  • Constrained new gold supply is placing greater emphasis on the increased delivery of above-ground stocks to meet demand. However, in the absence of central bank sales, and limitations on the size of the available scrap pool, the continuation of physical demand growth from ETFs and coin sales is putting upside tension on the market, ensuring the bull market is sustained into 2012-13.


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Tue, 03/06/2012 - 16:20 | 2229542 GetZeeGold
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Hell's the only thing that's not gonna burn.


Tue, 03/06/2012 - 16:29 | 2229605 resurger
resurger's picture


Tue, 03/06/2012 - 16:43 | 2229676 Ahmeexnal
Ahmeexnal's picture

Hmm....PPT must be on vacation today.  Or they will act 5 minutes before the close.

Tue, 03/06/2012 - 17:03 | 2229778 Troll Magnet
Troll Magnet's picture

i'm SO itching to buy more today.

Tue, 03/06/2012 - 17:32 | 2229887 fourchan
fourchan's picture

only an idiot would sell physical at this point in our history.

Tue, 03/06/2012 - 17:09 | 2229803 Imminent Collapse
Imminent Collapse's picture

Correct.  I always laugh when I see any "scholarly analysis" of the price of gold or silver.  All BS.  It so manipulated that any suggestion that you can forecast the price based upon market metrics is crazy.  The price of gold and silver will be whatever TPTB want it to be - until they lose control.  Forget all the rationales for why the prices should be higher or lower.  None of that matters.  I hate to be a broken record on this, but there are new readers to ZH that may not appreciate this and may actually invest in PM based upon these types of articles.

Not to say that you shouldn't be holding physical PMs, but not for short term gains - only for protection against currency value collapse (i.e., hyperinflation).  In fact YOU SHOULD own some PMs.  But plan on holding them for a long time. 

Fucking rigged casino!  Hard to believe that it hasn't yet collapsed.

Tue, 03/06/2012 - 17:47 | 2229957 SPAREPARTS
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Hyperinflation is that necessary to justify an investment in PMs, 600% seems way outside what would be necessary to bring the system back into balance,I am not a schorlar but hyperinflation and complete collaspe appear over done?

Tue, 03/06/2012 - 20:39 | 2230521 LowProfile
LowProfile's picture

All I can say is do your own due diligence.  Read as much as you can.

Bass, Burry, Faber, Fekete, and FOFOA are good places to start.

Tue, 03/06/2012 - 17:47 | 2229958 SPAREPARTS
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Hyperinflation is that necessary to justify an investment in PMs, 600% seems way outside what would be necessary to bring the system back into balance,I am not a schorlar but hyperinflation and complete collaspe appear over done?

Tue, 03/06/2012 - 18:10 | 2230023 Ghordius
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Bloody best comment since long, long time.

Tue, 03/06/2012 - 23:11 | 2230919 tarsubil
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If the powers that be had complete control of the price, wouldn't gold still be $35?

Wed, 03/07/2012 - 16:10 | 2233290 passwordis
passwordis's picture

 Yes, the deck is stacked, the game is rigged BUT.. that does not mean you should totally dismiss the fundamentals. Something has been pushing the price up for 10 years in spite of a rigged game.  Instead of shooting straight up, it's three steps forward two steps back.. but the momentum is forward and upwards.

   Also if you were holding PMs for short term gains, this is the PERFECT market because the manipulation is so transparent,  The whole process repeats itself over and over again. It's comical.  I don't trade for short term gains because I'm not a gambler but if you have the balls to do that you couldn't ask for a better environment.

Tue, 03/06/2012 - 17:12 | 2229817 tmosley
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Need falling equities markets to force demand for more QE.

Tue, 03/06/2012 - 22:42 | 2230828 Uchtdorf
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Like today? Or a string of todays?

It feels odd to say we "need" that scenario, but it looks like total and massive default will be the only cure for the Bernankish Upward Debt Spiral of Death & Rehypothecationary Snake Oil (BUDSDRSO).

Tue, 03/06/2012 - 16:44 | 2229679 spiral_eyes
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i don't know. when morgan stanley (and other wall street banks) describe themselves as ultra-bullish on gold (as they did yesterday) i think realistically we need to be looking at a longer timeframe for gold to reach $2000. probably this year, but probably not in the next 3-6 months.

Tue, 03/06/2012 - 18:51 | 2230173 4horse
4horse's picture

delay. extend and pretend. delay  .  .  .  but a new york entity, yet again allowed to go unnamed, delaying the opening of what was to be this huge honest exchange until dead means there is no PAGE in history to be turned


hold. hold. holding your breath, like gold  .  .  .   one long slow boat   .  .  .  whose passage demands the total fucking zen of absent emotion, and, swami swami, a feet-to-the-fire threshhold of pain unseen since brit empiricists were faced with such holy, holy, holy fuckin maniacs as not only strolled over hot coals but, spooky spooky, no blisters


cause, if they can coopt china . . .



Tue, 03/06/2012 - 16:25 | 2229583 bdc63
bdc63's picture

It's almost 3:30 and no rally rumors yet ... what the heck?  Did someone over at the FED fall asleep on the job? ...

Tue, 03/06/2012 - 16:34 | 2229631 Mesquite
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Naw..The whole world is waiting on the iPad 3...

Bet you think I'm kidding...

Tue, 03/06/2012 - 17:47 | 2229955 Troll Magnet
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either that or they're out voting for obamney, santorum or gingrich.  fucking retards.

Tue, 03/06/2012 - 16:26 | 2229591 Ahmeexnal
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They forgot to mention....WAR.

Tue, 03/06/2012 - 16:31 | 2229613 DeltaCharlie
DeltaCharlie's picture

Yup, the war with Iran is a big factor.... MS can't bullshit that one.

Tue, 03/06/2012 - 17:30 | 2229874 francis_sawyer
Tue, 03/06/2012 - 22:18 | 2230764 hamstercheese
hamstercheese's picture

I'll see your war and raise you one..

Tue, 03/06/2012 - 17:35 | 2229903 battle axe
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Stay long GUNS and AMMO!!!

Tue, 03/06/2012 - 21:59 | 2230719 SAT 800
SAT 800's picture

With regard to the "analysis", and all the heavy-duty intellectualizing about whatever Bob or Bill think might happen; all I can say is; God only knows. Also; Whatever. The reason I'm leaving my bulk savings in Silver is what's the alternative? Italian Bonds? I don't think so.

Tue, 03/06/2012 - 16:19 | 2229545 Dumpster Fire
Dumpster Fire's picture

oh shit

Tue, 03/06/2012 - 16:24 | 2229556 GetZeeGold
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Annnnnnnd.......he's out!



Tue, 03/06/2012 - 16:21 | 2229558 Chaffinch
Chaffinch's picture

I will stay long gold but I hate it when the banksters agree with me!

Tue, 03/06/2012 - 16:28 | 2229598 bdc63
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though I did have a bunch of stops on for all my mining stocks that went off like popcorn last week.  i'm sure i'll jump the gun and get back in too early, but that's better then missing the next run i guess ...

Tue, 03/06/2012 - 16:51 | 2229718 Floordawg
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What is this "LONG" stuff?

All I know is "HOLD."

Tue, 03/06/2012 - 17:05 | 2229790 Troll Magnet
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a better question is, what is this "GOLD" stuff?  never heard of it and naturally don't own any, whatever it is.  too busy watching netflix on my ipad.

Tue, 03/06/2012 - 17:08 | 2229800 toothpicker
toothpicker's picture

It doesn't matter what they say or don't say. Gold & silver will go up anyway. And the sheeple will continue to chase paper.

Tue, 03/06/2012 - 17:26 | 2229862 Acet
Acet's picture

I'm just happy this is not an advice from Goldman Sachs - given their near-perfect track record in predicting the exact opposite of what happens, I would be seriously concerned, at least in the short-term.

Tue, 03/06/2012 - 17:50 | 2229966 SPAREPARTS
SPAREPARTS's picture

their not buying hard metal only paper

Tue, 03/06/2012 - 22:00 | 2230722 SAT 800
SAT 800's picture

Do you really? (Central Banks net buyers of Gold; not exactly a negative development for you).

Tue, 03/06/2012 - 16:21 | 2229560 Stackers
Stackers's picture

I'll give MS one thing. They make very nice, colorful charts and graphs.

All you need is that M2 money supply chart for the reason to stay long gold. When the Fed raises interest rates to 18%, I will sell my gold. Have strange feeling I might have a long wait.

Tue, 03/06/2012 - 16:28 | 2229602 GeneMarchbanks
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Only China can raise interest rates and even they won't. Get used to ZIRP4EVA. Or some horrific event of disaster outside of human control.

Tue, 03/06/2012 - 17:09 | 2229806 tekhneek
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When the Fed raises interest rates



Tue, 03/06/2012 - 17:51 | 2229969 GetZeeGold
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It's either stay ZIRPed.....or start writing a lot of interest checks on the 16 trillion debt.....any volunteers?


Tue, 03/06/2012 - 16:21 | 2229562 user2011
user2011's picture

I guess it means "please keep the gold price up until they dispose their long position and fill their short positions"..

The tactics is getting old.

Tue, 03/06/2012 - 16:24 | 2229576 Lost Wages
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Tue, 03/06/2012 - 16:25 | 2229582 i_fly_me
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Tue, 03/06/2012 - 16:25 | 2229585 Snakeeyes
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I agree. With the ECB and Fed expanding their balance sheets (until they explode), gold is a good play.

Economic slow down + ECB/FED Balance Sheets at almost $7 trillion!!!!!!!!

Tue, 03/06/2012 - 17:14 | 2229819 Troll Magnet
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if you've been dollar cost averaging, fine.  but if you're looking to add more to your stash, i'm not too sure if it's a good time to buy right now.  especially silver because 1) they can raise margins consecutively and hammer it down like they did last year and 2) we haven't really seen big name players liquidating their position in gold to raise capital yet and 3) benny shalom is always lurking out there to scare the living daylights out of weaker hands.  as crazy as it may sound, i can see gold falling to the $1,500 range again and silver to mid to high 20s sometime this year.  but then again, i have no idea what the fuck i'm talking about.  i should just STFU and turn my raggedy paper into more shiny metals today.  decisions, decisions... 

Tue, 03/06/2012 - 16:27 | 2229592 scatterbrains
scatterbrains's picture

It's as though berstanky told them all no QE for you unless energy prices come down which means gold and the rest need to tank first and thus the bankster recommendation to Go balls deep the pm's. Didn't Goldman also put out a long gold call recently ?  Better mind your stops bitchez


Tue, 03/06/2012 - 16:48 | 2229703 peekcrackers
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Ahh! Me so goldy!
Me love you long time!

Tue, 03/06/2012 - 16:26 | 2229593 Rynak
Rynak's picture

If even morgan stanley says this, it means what i already suspected to happen.....

....expect that they in the midterm will do to gold, what they did to silver: A controlled "price range" that allows almost linear tops and bottoms, thus letting daytraders play, while the overall pricerange is controlled.... and way more flat than fiat inflation.

Tue, 03/06/2012 - 16:28 | 2229601 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Silver just finished forming a perfect inverse head and shoulders on the daily.

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