Goldman, which is the hedge fund best known for originating prop order flow in the opposite direction of what its sellside "research" team tells its clients to do (see Tom Stolper), has never been clearer on gold [12]: "Gold is slam dunk sell for next year because the U.S. economy will extend its recovery after lawmakers resolve stalemates over the nation’s budget and debt ceiling, Goldman Sachs Group Inc.’s Jeffrey Currie said." How the economy will expand, especially with the Fed supposedly tapering (even though everyone saw what happened to markets and the economy at the mere mention of "tapering" the last time around) and eventually ending QE - the only driver of upside market momentum in the past 5 years - was not discussed. What was, however, clear is that Goldman will continue buying all the gold its clients have to sell until the bailed out hedge fund's price target of $1,050/ounce is hit.
Some more amusing commentary from the Bloomberg wrapper article: [12]"[Gold] has tumbled 21 percent this year to $1,322.28 an ounce on speculation that the Federal Reserve would reduce its $85 billion monthly bond-buying program, known as quantitative easing, as the economy recovers." Well, uhm, now that such speculation has been proven false, will gold rebound? Why of course not. Recall that as Paul Singer said [13], the most direct consequence of soaring gold prices is even greater loss of confidence in fiat, and that is something neither the Fed, nor the BIS' gold selling (we would say trading, but who's fooling whom here) team would be happy with.
To be sure, Goldman is not alone in worrying about the future of fiat.
Currie and Ric Deverell, the head of commodities research at Credit Suisse AG, both said on a panel at the Commodities Week conference in London today that selling gold is their top recommendation for trading in raw materials in the next year. Gold is heading for its first annual loss since 2000, and is the third-worst performing commodity in the Standard & Poor’s GSCI gauge of 24 raw materials this year, after corn and silver.
But going back to Currie, and his floral descriptions:
“Once we get past this stalemate in Washington, precious metals are a slam dunk sell at that point,” Currie said. “You have to argue that with significant recovery in the U.S., tapering of QE should put downward pressure on gold prices.”
Of course, the fact that neither is actually happening is irrelevant to the vampire squid, whose last "slam dunk" trade was to buy crude to $150 in the summer of 2008.... weeks before it hit $30.
Finally, as for gold being a slam dunk sell, explain that to JPM, which continues to scramble to get every ounce it can, last night quietly transferring yet another 4,459 [14]ounces of vault gold from Scotia Mocatta to its own vault deep under 1 CMP, which may or may not be for sale.