What a difference five days makes.
Recall last Wednesday evening, when none other than Goldman decided to be the latest to piggyback on gold’s torrid momentum, by saing “there’s scope for the gold price to extend much higher over time.” This is what Goldman’s chartists predicted:
The current area includes the 100-wma and the trend across the highs since March ’14 (wedge resistance). It’s formed an exhaustive looking candlestick pattern and oscillators seems to be turning. Basically, it seems a good place to start a corrective pullback. The 100-wma in particular was an important pivot in determining the start of the late-’12 decline.
Â
From a wave count perspective, the market is likely in the initial stages of a counter-trend ABC correction which could eventually retrace ~38.2% of the 5-waves from ’11 to 1,381. From a pure techs perspective, breaking from a declining wedge would initiate a medium-term target back at the start of the pattern ~1,392.
Â
Bottom line, although 1,200-1,202 might hold in the near-term, there’s scope to extend much higher over time.
Initially, this troulbed us because whenever Goldman tells clients to do one thing, the firm is doing precisely the opposite. After all, this is the firm whose Top 5 of 6 trade recommendations for 2016 were stopped out at a loss for anyone who followed them 6 weeks into 2016 as we wrote in “Goldman Capitulates: Closes Out 5 Of Its 6 Top Trades For 2016 With A Loss.”
How happy, then, we were, if very much unsurprised that less than a week later, as the gold momentum has been briefly snapped, that Goldman’s head of commodities has decided to take the other side of Goldman’s technical trade, and is now advising Goldman’s repeatedly crucified muppets, pardon, clients to short gold. Just moments ago, this is what Goldman’s head of commodities said:
As we maintain our view of rising US rates and hence lower gold prices with a 3-month target of $1100/toz and 12-month target of $1000/toz, we are recommending shorting gold through a GSCI-style rolling index. Ironically, gold has a negative yield and such a short would create a positive carry in a world concerned about negative interest rates that made gold rise in the first place. While we acknowledge that fears around systemic risks can push prices higher in the near term, we see such risks not offsetting the potential gain given how extreme pricing has become and the heavy data reporting period in coming weeks that will likely show that the while economic growth has slowed, it is not collapsing to the point to justify such extreme pricing across assets.
