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, the widely followed veteran of the 1970s gold boom (click here).
Then he claimed 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.
This goes a long way to explain the recent rather unexpected downturn in the gold price and its moving lower with the US dollar, something that seldom happens. The big bullion banks are getting out of their short positions ready to profit again from the next leap up in gold prices.
Goldman told its clients last week: “Our expanded modeling suggests that the improving US growth outlook will outweigh further Fed balance sheet expansion and that the cycle in gold prices will likely turn in 2013. Risks to our growth outlook remain elevated however, especially given the uncertainty around the fiscal cliff, making calling the peak in gold prices a difficult exercise.”
Spot the weasel words at the end of that statement, Goldman as good as admits it is just as likely to be wrong in this call. However, it does seem to have been enough to put the wind up the gold market over the past week, doubtless with some enormous position shifting by the bullion banks making for most of the price action.
As Mr. Sinclair wryly observes: “I promised you that the manipulators would shift to the long side of gold before the final parabolic move. I imagine that Goldman has a huge buy order for special clients, that is themselves. When was the last time Goldman Sachs did the world of investment and investors a good turn?”
Gold investors can either decide to try to second guess the bullion banks or sit tight, and in the absence of any special inside knowledge that seems the best advice. Mr. Sinclair has the bullion banks rumbled and will doubtless be proven correct in his judgement yet again. Cost push currency inflation is going to take gold prices much higher (click here).
He will be as right on this as he was about Chinese gold buying intentions a month ago… (click here).