If history repeats itself (which it has a habit of doing), then yes the bank is preparing to load up on gold. This morning, Jeffrey Currie, the global head of commodities research for the bank said: “While we agree with the mid-cycle price somewhere around $1,200, we believe that at least near term it can overshoot to the downside, which is why we have $1,050” as a target, Currie said. “It clearly could trade below $1,000.” This sounds oddly familiar.
Here’s the Bloomberg article: Goldman Sees Risk of Gold Below $1,000 as US Economy Gains
In April 2013, Jeffrey Currie sent clients of the bank this note: “As a result, we recommend closing the long COMEX gold position that we first initiated on October 11, 2010 for a potential gain of $219 per ounce, with the risk reversal overlay expired on March 25. While there are risks for modest near-term upside to gold prices should U.S. growth continue to slow down, we see risks to current prices as increasingly skewed to the downside as we move through 2013,” Courvalin and Currie said.
As they were initiating this sell recommendation for their client portfolio’s the bank was buying as much of the GLD (SPDR Gold Trust ETF) that they could, adding 3.7 million shares. Hedge fund manager John Paulson was busy selling 12 million shares of gold related ETFs which Goldman bought up. That call by Goldman helped the GLD to low levels and that’s when the bank stepped in. I would view this latest bearish call by Goldman as a bullish signal for gold. Watch for Goldman to ‘reverse’ their call on gold within the next 6 to 12 months (or earlier).
Just remember what they always told you: fool me once, shame on you; fool me twice, shame on me.