Wednesday, April 10, 2013

Gold prices hit by Goldman forecast cut, Fed

Update 1:  Includes GGR commentary and chart. 

Goldman Sachs LogoBarbara Kollmeyer and Carla Mozee,  for MarketWatch write: MADRID (MarketWatch) — Gold prices fell on Wednesday after Goldman Sachs cut its forecast for this year, and the minutes of the Federal Reserve’s last policy meeting showed sharp divisions among officials bank about how long it should keep buying bonds.

Gold bars and coinsPrices stepped back from their strongest level since the start of the month, with gold for June delivery  down $10.60, or 0.7%, to $1,575.70 an ounce.


The precious metal rose Tuesday to settle up $14.20, or 0.9%, at $1,586.70 an ounce on the Comex division of the New York Mercantile Exchange. It was the highest close since April 1, as a weaker dollar and losses in four of the previous five sessions helped lure in bargain hunters.

In a note to investors, GoldmanSachs said it now expects an average price for gold in 2013 of $1,545, down from a prior forecast of $1,610. In 2014, Goldman’s analysts expect prices to fall to $1,350, down from a prior view of $1,590. It was the second cut for their gold forecast in less than two months.

 “With our economists expecting few ramifications from Cyprus and that the recent U.S. slowdown will not derail the faster recovery they forecast in 2H13, we believe a sharp rebound in gold prices is unlikely,” they added.

The MarketWatch story continues at the link below.

Read more: 

GGR comment:  Goldman talking their book as only Goldman can.  Other reporting at Kitco mentioned that the Goldman note said they were "initiating a short position on gold."  

We find that comment, if true, to be pretty audacious given the now record spec short positioning in gold and silver futures.   For one example, see the chart below of the Managed Money short position for gold as of  April 2. 

  20130410 Gold MM short

(That's a near record high spec short position for gold futures, at least for as long as the Commodity Futures Trading Commssion (CFTC) has been reporting disaggregated commitments of traders (DCOT) positions, which we have data for since 2006.) 

If Goldman is "initiating" a short gold position we will eat our hats here at GGR.  Much more likely is that Goldman is already nearly maxed out on their (own) short position for the yellow metal and, following the news from the Bank of Japan of massive new money printing; following gold fetching up above its important $1,525 technical support; and needing new "blood" on the short side, the Goldman gang felt the need to call in some public negative reinforcement.  

"Initiating a gold short position."  Isn't that quite obviously rich? 

Just to be clear, Kitco reports:  "Furthermore, the bank said Wednesday it is closing out its long Comex gold position first initiated in October 2010, for a potential gain of $219 an ounce, and is now calling for a short position in Comex gold. It estimates the 2014 year-end target for gold prices at $1,270."

No one should be the least bit surprised to see this kind of after-the-fact call by Goldman.  They are famous for it. 

What would be surprising is if very many people reading their notes actually take the bait.   Remember their call for $200 oil?   

Blankfein Lloyd scowl
(Image:  Goldman Sachs CEO Lloyd Blankfein)  

 MarketWatch story on Goldman's "super spike" call for oil from March of 2008 at this link





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Trading gold, silver and mining shares since 1980 with a focus on taking advantage of volatility extremes, Gene Arensberg analyses the markets through a basket of technical and fundamental indicators and shares his findings from time to time here at Got Gold Report. Mr. Arensberg has been quoted in the Wall Street Journal, Dow Jones MarketWatch, USA Today and dozens of other news organizations.

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