Wednesday, October 9, 2013

Will The Real Goldman Sachs View On Gold Please Stand Up

The head of Goldman Sachs' commodities research area yesterday announced in headline-grabbing fashion that gold was a "slam dunk" sell.  What's truly stunning about this is that during the 2nd quarter this year, Goldman Sachs revealed in an SEC 13-F filing that it had accumulated over 4 million shares of GLD (that's half a billion dollars worth) of GLD to become the 6th largest holder.

True to its historical track record, Goldman often says one thing through its research reports but does the exact opposite with its capital.  I've written an article published by Seeking Alpha which compares the Goldman's "sell" report, which has no basis in factual analysis, with a list of fundamental factors that point to the reasons that Goldman is saying one thing but doing the exact opposite with its capital.  You can read my article here:  Follow The Money

But before you read that, consider this accounting from of the last time Goldman issued a highly publicized "sell" on gold back in 2007:

It is worth remembering that Goldman, to much fanfare and media attention, “told clients” in November 2007, to sell gold. On November 29, 2007, Goldman recommended that investors sell gold in 2008 and it named the strategy as one of its ‘Top 10 Tips’ for the year.

Gold subsequently rose nearly 6.4% in December 2007 alone - from $783.75/oz to $833.92/oz.

Gold then rose another 5.8% in 2008 - from $833.92/oz at the close on December 31, 2007, to close at $882.05/oz on December 31, 2008.

Gold rose 12.2% in the 13 months after Goldman's sell gold call. Gold then rose 23.4% in 2009, 27.1% in 2010, 10.1% in 2011 and 7% in 2012.

Thus, proving Goldman’s ‘Top Tip’ prediction absolutely wrong and costing their clients and many of the unsuspecting public a lot of money in the process.

At the time, Goldman cut its gold forecast to $740/oz from $810/oz on a 12 month basis. One year later, gold closed at $882.05/oz - more than 19% above Goldman’s ‘forecast’.

The crystal ball gazing of Wall Street banks and hedge funds and others who have suggested gold is a bubble in recent years has cost many of the investment public dearly.

As ever, it remains wise to ignore the considerable noise that emanates from Wall Street and maintain a healthy, long term allocation to physical gold.


  1. We are just doing Gods work. Goldman Sachs a name you just can't and should never trust.

  2. Fuk Goldman Saks, they should all put their bald heads together and make an ass of themselves.

  3. Sandoval bemoans the fact that the Federal shut down will put extreme pressure on many state programs such as WIC, unemployment and the National Guard. What most Nevadans do not understand is the Federal government pays for about half of Nevada’s budget. We are a state which thinks we are independent and free, but the Federal purse strings are still there and necessary as ever. Nevada is like someone on unemployment thinking their benefits are a job and the money they get is “earned income”.

    Nevada’s reliance on federal money is very disturbing in both practicality and fiscal morality. For a state that takes pride in its independence, it is at the federal entitlement trough more and more.

    Let’s not brag that taxes paid by Nevadans is (are) very low, afterall, we have transferred much of our tax burden to the Federal government. Taxes created by Nevada are within our control, but Federal monies are unreliable, with strings attached and at the political whims of Washington. Reliance on them is stupid.

    Then, to make matters worse, half of the remaining budget (non-federal money) comes from tourists in the form of gaming, entertainment and extra sales taxes. The remaining amount is what Nevadans really pay. It is not much, though many right-wing “research” groups think so. Since they lie about Nevada’s budget all the time they are now deluded and think what they say is true.

    The fact is this… Nevada is in deep trouble if the shut down continues past a month. Programs totally funded by the Feds will feel the effects first, and there are no rainy day funds to make up the difference. Then what of the other agencies such as the state’s Environmental Protection division and the Transportation department which are totally dependent on Federal dollars? Would agreements and laws which keep their money flowing still be reliable? Probably not!

    The state budget problem has been festering for many decades, and the Big Crunch is here.

    [I believe the WHOLE state of nevada will have to default if they don't create good jobs and revenue very soon. Jobs coming back at 8.25 hour at 15 hours a week is not going to cut it.]

  4. Kondratieff Winter * The Dog Bone Portfolio * Gold (Real Money)

    Night and day
    Commentary and weekly watch by Doug Noland

    The question arrived via and appeared simple enough: "Can you explain how QE funds are inflating the asset markets if these monies are being parked back with the Fed, collecting interest? Can they be in two places at the same time?"

    The impact of the Fed's experimental quantitative easing (QE) program is an issue of great interest. In his talk last week, Federal Reserve Bank of San Francisco president John Williams noted that considerable Fed resources have been devoted to researching the issue. Mr Williams spoke of initial findings, stating the impact on Treasury yields in meager basis points. A cacophony of Fed comments leads me to believe Federal Reserve analysis is oblivious to the key impacts of its ongoing monetary inflation.

    In early Credit Bubble Bulletins, I was fond of employing my old CPA skills, as I used scores of debit and credit journal entries ("double-entry bookkeeping") to illustrate the "infinite multiplier" potential of contemporary non-bank credit expansion. In particular, I remember a rather exhaustive (exhausting) series of debit and credit entries explaining how the growth of GSE IOUs (debt) intermediated through the money market and hedge fund channels was behind unconstrained growth in New Age "money" and credit.

    I was convinced at the time this atypical monetary inflation was fundamental to a historic credit bubble and myriad attendant asset price and economic distortions. I still believe it was among some of my most insightful analysis, and I'll note that it did seem to resonate strongly with perhaps a handful of readers (including Ed McCarthy, who became a dear friend).

    I will spare readers a tedious debit and credit exposition. I will instead highlight "flow" analysis in an attempt to illuminate some of the myriad systemic inflationary impacts from the Fed's QE laboratory.

  6. Dave, I think you are too optimistic. We may indeed see $1050 in 2013 or maybe early 2014. Of course, fundamentally speaking, the current situation is bullish for gold and silver. However, if you look at the price patterns, you will see that the cartel is probably waiting for the resolution of the debt ceiling crisis to hammer gold and silver further. By the way, I bet you don't believe the US will default on her debt, do you?
    GOFO rates already moved from negative to positive at the beginning of Sept, which could a preemptive attack by the Fed to flood the market with the gold stored in its vault. In my opinion, we'd better at least hedge our PM positions.

  7. "...doing god's work"
    Of course, there are some who worship satan as god

  8. Well, Dave. I don't think people at Goldman Sachs are very bright. Big decision makers maybe but ordinary employees are not. Some of them only have limited knowledge of the financial markets they work with and have a lot of misunderstanding of basic concepts. But one thing most Goldmaners are extremely good at is office politics. This is from my personal experience.

  9. My Lord Doug you use lots of fancy words and huge numbers.

    You act as if it's all real.

    It's not.

  10. The farce will continue until the U.S. Government thieves , central banking thieves and uber rich thieves can squeeze every last ounce of assets from the American people, as is possible.

    This government shut down event is a total bullshit maneuver. Another ploy which is meant to throw all the clueless into further darkness .

    Guaranteed > the U.S. Gvrnmnt will save the day.....Allot of CRAP ! Different day. Nothings changed people ~ we're all getting the royal screwin' still !!