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Goldman Sachs Cuts Gold Forecast AFTER Price Plunge, Purposely Late?

Commodities / Gold and Silver 2013 Feb 27, 2013 - 05:35 AM GMT

By: Mike_Shedlock

Commodities

In the less than useless category, Goldman Sachs lowered its gold price targets by over $200 an ounce following the recent plunge. Goldman now says Gold's Cycle Seen Turned.

The cycle for gold prices, which climbed for 12 straight years, has probably turned as the recovery in the U.S. economy gathers momentum and investment holdings collapse, according to Goldman Sachs Group Inc., which reduced forecasts for the metal.


The bank cut its three-month target to $1,615 an ounce from $1,825 and lowered the six- and 12-month forecasts to $1,600 and $1,550 from $1,805 and $1,800. Goldman reversed an assumption exchange-traded products holdings will expand in 2013, analysts Damien Courvalin and Jeffrey Currie wrote in a Feb. 25 report.

Soros Sells

Billionaire investors George Soros and Louis Moore Bacon cut their stakes in gold ETPs last quarter, while John Paulson maintained his share, government filings showed this month. Global holdings reached a record 2,632.5161 tons on Dec. 20.

Gold futures fell to $1,554.30 on Feb. 21, the lowest since June 29, after minutes from the U.S. Federal Reserve's January meeting showed debate over the pace of asset purchases.

"Our economists believe that the downside risks to their forecasts have diminished while the uncertainty about the size of QE3 is high," the Goldman report said. "We believe that a shift has occurred over the past few months with conviction in holding gold waning quickly."

Downside Risks and QE Uncertainty

In contrast to the opinion of Goldman, I would like to note there is little uncertainty about QE. Bernanke is insanely committed to the idea.

In regards to downside risks to the economy I will also take the other side.

Downside Risks

  • The 2% payroll tax hike is going to take a far bigger bite out of the economy than most think.
  • The "sequester effect" will be small, yet larger than most think
  • Europe is an absolute basket case and will get worse
  • China is slowing down and overheating at the same time from an inflation standpoint (See China Overheating? Biggest Weekly Cash Drain in History; Questions Surface Over Chinese Growth Numbers)
  • Global rebalancing in general is not off to a good start
  • US budget cuts are anemic and far more should come. The only upside is if none come, and that effect would be a temporary sideways push because more stimulus is not in the cards, even if needed.

It is incredulous for Goldman to state diminished downside risks.

Gold Action

With Soros and others selling, and with Goldman (and/or JP Morgan) likely front-running the trade by shorting futures at illiquid times, perhaps we have already seen the bottom at $1554.

Unlike others who believe gold is constantly manipulated lower, I believe manipulation is equal in both directions. Look at it this way: In contrast to what GATA says, Goldman and JP Morgan do not care which direction gold (or silver) is going, only that they make a profit by front-running the surge in volume.

After a rebound in price, expect Goldman to change its forecast again, telling everyone why they should buy gold. This is the way Wall Street parasites work (even if in this example I am early with this forecast).

A quick check now shows gold has already rebounded to $1616, up $30 on the day. Where to from here? I don't know, but with Soros and other big sellers out of the way, and with Goldman and other market makers front-running the trades lower, I like my chances here, quite a lot.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2013 Mike Shedlock, All Rights Reserved.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Mike Shedlock Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

despe906
27 Feb 13, 11:32
what moves gold

Dear Mike,

So you don't like the fact that market participants enter the market and generate price movements? What would you like the market to look like instead? You wish you had straight line movements with two or three straight line corrections only once a year? And you want Goldman Sachs, Soros or Obama to announce to the public what next move will be? So that you can write on your blog :

'Two months ago, Goldman Sachs lowered its gold price targets by over $400, also Soros cut their stake in gold. Obama officialy agreed and the prices fell since then by $400. You read my blog and if you acted as me and them, you made hugh amounts of money. Who is the loser? Those who don't listen to Goldman Sachs, Soros, Obama and me'.

Mike the Revelator's ideal world.


GoldStandard
27 Feb 13, 22:16
Gold Price volatility

Hmm. Its important to take a step back from the short term movements and look at the larger picture to see why it is advisable to keep part of your portolio in gold (or silver). Gold investors tend to see gold as money, that will hold its purchasing power over long periods of time. Notwithstanding this there are of course fluctuations, which is why it should be part of a balanced portolio. The current near zero interest rates are fuelling credit expansion and debasing the currency. Short term fluctuations (and potentially manipulations) dont change this. The bubble that gold can help defend against is the bond bubble, where soveriegn debt is grossly overvalued and held there by central bank bond purchasers (quantative easing). The site below is worth a look if you would like more information on precious metals investing:

http://www.guidetoinvestingingoldandsilver.net


maphorn
28 Feb 13, 10:59
Gold Myths!

Gold is just a commodity like anything else!

Gold does not hold its value over time otherwise it would pretty much flat line against a basket of currencies!

It has lost about 50% using the same basket since its "real high" in 1983!

http://armstrongeconomics.com/2013/02/18/gold-never-really-made-new-highs-yet/

Marc


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