Thursday, May 20, 2010

"Gold prices getting close to cyclical highs - Goldman Sachs" (GLD; GS)

In early pre-market trade the SPDR Gold Trust ETF isdown $1.52 (1.30%) at $115.11.
Following up on yesterday's Kitco's Jon Nadler: "Gold’s Current Highs Not Sustainable In The Long Run" and "Here Is Why Jeremy Grantham Thinks Gold Will Crash" (GLD). Spot gold is trading down another $14.60 at $1176.80.

The timing of that post was pretty lucky, here's the 24 hour chart from Kitco:
Live 24 hour Gold Chart
Refresh Chart Close Window

If I may be a bit more self-referential [reverential? -ed] before the Goldman piece, I'll quote a bit of advice that I used in a GE post last week:
Mother: .....And remember, the Lord loves a working man.
Navin: ........Lord loves a working man.
Father: ......And son, don't never, ever trust whitey.
-The Jerk (1979)
That is especially true when GS is talking commodities or currencies. A recent example was their EUR/USD call on April Fools Day:
Goldman Sachs on EUR/USD: "no freaking clue where the EUR will go next" (GS)
Less than a month after Goldman braved the choppy and hypervolatile waters of pillaging and raping its biggest clients (aka tactical FX recos), with first a buy EUR, then sell EUR reco, the firm has captulated, and is calling for a $1.35 target: essentially saying it has no freaking clue where the EUR will go next....
That post also referred back [you do that a lot -ed] to a Nov. 2008 story where Goldman bailed on CalPERS and the other institutions who were evading "speculative" position limits in the oil pit by piggybacking on Goldman's "commercial" designation via swaps:

It’s official, Goldman capitulates on oil

Oil is below $49/Bbl, $48.70 down $4.00 last I saw.
From FT Alphaville:

Goldman’s latest commodities note is out, and this is all you need to know:

Closing our oil trading recommendations
Although we have emphasized in the past few weeks that continued weak oil demand exacerbated by constrained credit conditions will contribute to soften near-term fundamentals keeping WTI prices, timespreads and gasoline cracks under pressure, we have left our oil trading recommendations open, expecting that high volatility would provide a better exit point to our trades. The volatility in the past few weeks has mostly been to the downside and the pressure on the oil complex has increased. In the near term, we do not expect significant upside potential and as a consequence we are closing all of our oil trading recommendations.

Translation: We were wrong and we’re sorry. Ouch.

From Barron's:

Goldman Backs Off Its Oil ‘Super Spike’ Theory


Take everything GS says with a grain of salt and remember "Don't never ever...

From Mineweb:

Prices of the yellow metal are likely to continue rising into 2011 but, are close to the top of their long term cycle


Gold prices are likely to continue to rise into 2011 but are getting close to the top of their long term cyclical highs.

Speaking at the World Mining Investment Congress, Jeff Currie, global head of commodities research at Goldman Sachs, said that there is a very sustained and strong correlation between the price of gold and real interest rates.

"If the real interest rate starts to go down, commodities priced in that currency should go up," he says. And, as proof of this he says, last week, the only currencies in which gold didn't hit all time highs were the Canadian and Australian dollar. "And, it is these countries that have already seen a rise in real interest rates, in the sense that those central banks are already in a tightening cycle."

Currie points out that there is a millennium worth of data points for gold, going all the way back to the year 1250. And, he says, it is clear from this that, rather than trending, gold moves in cycles.

"The very long term price for gold is somewhere around 750 dollars a troy ounce," he says, and, when asked where the market currently is in the extremely long term gold cycle, he told Mineweb "on a scale of 0 to 10, with ten being the top of the cycle, I would say it is somewhere around 8 or 9."

Currie also makes the point that, contrary to what many think, gold does not price, price levels, gold prices the real value of owning a currency. This he says clearly indicates that gold is the currency of last resort and, because it has no intrinsic value, it is the perfect asset to do so.

Another opinion Currie says doesn't hold water when backed up by data is that the price of gold is being pushed up by gold bugs buying gold and driving the price to the moon....MORE

Also at MineWeb:

Copper looks good in the long term - Goldman Sachs