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Trading Lessons

Goldman Sachs Targets $1200 GOLD Price

Commodities / Gold and Silver 2013 Feb 28, 2013 - 12:32 PM GMT

By: Darryl_R_Schoon

Commodities

The gold market is all smoke and mirrors. But now the bankers’ house is on fire, the smoke is getting thicker, the mirrors are cracking and the screams of the trapped will soon be heard. 


GOLDMAN TARGETS $1200 GOLD

Like most truisms, the old adage, ‘connecting the dots’, is easier said than done. Choosing the correct dots is far more difficult than merely connecting them. If you connect the right dots, you are called a soothsayer. Connect the wrong dots, you look like a fool.

Regarding what is currently happening in the gold and silver markets, long-time and highly regarded gold analyst Jim Sinclair appears to be a soothsayer. Four months ago, on October 21, 2012, ArabianMoney.net noted that Jim Sinclair had warned subscribers the bullion banks were going to push gold prices lower.

Because central banks had become net accumulators of gold, Sinclair said to make money in the new environment the bullion banks—Goldman Sachs, JPMorgan, Deutsche Bank, HSBC—were going to change their strategy regarding precious metals.

According to ArabianMoney.net, Sinclair predicted the banks’ new strategy would involve a change in ‘spread management’:

Spread management is rather technical for non-industry specialists. This is the profit per ounce when gold is sold, and the bullion banks juice this profit by taking both long and short positions in the marketplace to improve their real profit…What Mr. Sinclair foretells is an upcoming move by the bullion banks to dump their short positions and go fully long…

Sinclair said the bullion banks would look to pull gold down one last time to allow them cover to reverse their own huge short positions in the market. Once this is safely accomplished they will go fully long in their own positions and take the gold price far higher.

Regarding the timing of this move by the bullion banks, ArabianMoney.net wrote:

Right now the preoccupation in the bullion market is over a short-term correction, and the more alarming potential for a repeat of the 30 per cent price crash of 2008-9. Mr. Sinclair seems to be hinting that this will provide precisely the environment for the shedding of shorts and the creation of long-only positions in the market.

“WE MAKE MONEY ON THE SPREAD”

DRS cartoon, p. 87, Time of the Vulture, How to Survive the Crisis and Prosper in the Process, Darryl Robert Schoon, 3rd ed. 2012

…all that is required is a change in spread management by the gold banks and you will have whatever price the gold banks want from $3,500 to $12,400.
Jim Sinclair, October 2012

GOLDMAN SACHS TALKS GOLD LOWER
Six weeks after Sinclair’s warning, the bullion banks set the stage for a drop in the price of gold as Reuters reported Goldman Sachs predicts turn in gold bull market. In December 2012, Goldman Sachs lowered its three, six and 12-month forecasts for gold and predicted the gold cycle would turn lower in 2013.

 Absent additional easing in late 2013, we expect gold prices to decline at a faster pace in 2014 and to reach $1,625 an ounce by year-end.
Goldman Sachs, December 5, 2012

On December 6th, AabianMoney.net reported: Goldman Sachs has put out a negative call on gold saying that the bull market is over, exactly the sort of market maneuver predicted six weeks ago by ‘Mr. Gold’ Jim Sinclair…

On January 16th, Goldman analysts whipped up even more fear among gold investors by predicting a long-term price of gold of $1200:

…we expect that gold prices will continue to trend lower over the coming five years and introduce our long-term gold price of $1,200/oz from 2018 forward.

THE CHINESE NEW YEAR GOLD MASSACRE February 11th to February 22nd

To put their strategy into play, the bullion banks waited for Asian demand to slow during the two week Chinese New Year celebration; and when the Chinese New Year began on February 11th the bullion banks began forcing gold and silver lower.

On Monday February 11th, gold was at $1660. On Friday, gold closed at $1610. The following week, gold reached a low of $1,558 on Thursday, Feb 21st before finishing Friday at $1,581.

The strategy worked. The Chinese New Year’s route of gold had caused nervous investors to sell and investment funds to exit their long positions and instead go short allowing the bullion banks to exit their positions on the short side.

On Friday February 22nd, gold trader Andrew Maguire noted: The paper market longs have been tricked into selling.  Obviously the managed money and the specs are now being tricked into short selling.  Who do you think is on the long side of those trades?

These bullion banks have actually successfully transferred massive short positions into very weak hands.  And this next week is going to provide large short fuel above the market.  As soon as this leveraged selling is insufficient to meet the bullion bank buying, which will happen, if not today it will be early next week.
The record number of gold shorts held by speculators usually presages a rally in gold prices.

The gross short position held by speculative traders in US gold futures and options has neared or exceeded 60,000 contracts only 5 times before in the last 8 years…The average 6-month change in gold prices, according to analysis by BullionVault today, has then been +28%.
http://goldnews.bullionvault.com/gold-futures-022520121

A 28% rally in gold at today’s [February 27, 2013] price of $1,598 would take gold to $2,045.

GOLD LIFTOFF SOON? MAYBE SO, MAYBE NOT

Now that bullion banks have exited their short positions and are long gold, the bankers are still going to protect their highly profitable paper money scheme and are not going to roll over and cede victory to gold unless forced by circumstances to do so.

Exiting their short positions removed the possibility the bullion banks would suffer catastrophic losses if gold prices exploded upwards. Now, the banks will instead be able to profit by being on the long side of the trade leaving the managed funds and speculators to bear the losses.

This does not mean, however, the bullion banks will abandon the credit and debt paper money cartel in their battle against gold. What it does mean is that the cartel has suffered a significant loss and gold’s victory is now one significant step closer.
Supply and demand in the battle between gold and paper money has been offset by the use of credit and debt by the paper money cartel. Up until 2001, the paper money cartel had the momentum. After 2001, gold did. It still does today.

GOLD IS A MOMENTUM TRADE

The truth about geopolitics as well as finance is distorted by the media to serve those in power. This does not change the truth although it does change what people believe. The current controversy surrounding Iran is a case in point. My current youtube video, Why Iran Went Bonkers, addresses that question, see http://youtu.be/oWen9rChnuA .

Perhaps a squeeze on gold shorts will soon take gold to $3,500 to $12,400 as predicted by Jim Sinclair or, it may come later. Have faith, it will come.

Buy gold, buy silver, have faith

By Darryl Robert Schoon
www.survivethecrisis.com
www.drschoon.com
blog www.posdev.net

About Darryl Robert Schoon
In college, I majored in political science with a focus on East Asia (B.A. University of California at Davis, 1966). My in-depth study of economics did not occur until much later.

In the 1990s, I became curious about the Great Depression and in the course of my study, I realized that most of my preconceptions about money and the economy were just that - preconceptions. I, like most others, did not really understand the nature of money and the economy. Now, I have some insights and answers about these critical matters.

In October 2005, Marshall Thurber, a close friend from law school convened The Positive Deviant Network (the PDN), a group of individuals whom Marshall believed to be "out-of-the-box" thinkers and I was asked to join. The PDN became a major catalyst in my writings on economic issues.

When I discovered others in the PDN shared my concerns about the US economy, I began writing down my thoughts. In March 2007 I presented my findings to the Positive Deviant Network in the form of an in-depth 148- page analysis, " How to Survive the Crisis and Prosper In The Process. "

The reception to my presentation, though controversial, generated a significant amount of interest; and in May 2007, "How To Survive The Crisis And Prosper In The Process" was made available at www.survivethecrisis.com and I began writing articles on economic issues.

The interest in the book and my writings has been gratifying. During its first two months, www.survivethecrisis.com was accessed by over 10,000 viewers from 93 countries. Clearly, we had struck a chord and www.drschoon.com , has been created to address this interest.

Darryl R Schoon Archive

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