“We are all familiar with Goldman Sachs (GS) bearish outlook on gold in 2013. According to Dave Kranzier of “Seeking Alpha”, while head of GS Research, Jeff Currie still has a “sell” recommendation with a target of $1050, the firm filed an SEC 13-F disclosure at end of June revealing it purchased more than 3.7 million SPDR Gold Trust in 2Q making GS the 6th largest holder. Kranzier says GS holding in GLD has increased to more than 4.4million shares with a value of $558.7 million on 10th October. Paulson & Co is still the biggest holder at $1,290.7 million.“
Eoin Treacy's view Thank you for this educative email.
There are a wide number of reasons one might own gold but perhaps the two most
relevant to this discussion are as a hedge against financial sector calamity
and for price appreciation.
Gold’s appeal as the only real money has long been lauded and its role as a diversification tool has gained ground over the last decade. However the remonetisation of gold in the eyes of investors as well as the increased level of participation contributed to gold’s correlation with other assets increasing. The fall of 2 million ounces in ETF holdings of gold this year suggests that the potential for gold’s correlation to invert is improving.
From the perspective of a balanced portfolio there are arguments for holding a position in gold even if the short-term outlook for pricing is uncertain. If we consider that prices have fallen to an approximation of the marginal cost of production for a wide swathe of the junior mining sector then the outlook for pricing is likely to be increasingly dictated by institutional and government participants. The block sale of 500,000 ounces and the temporary halt of treading today appear to bolster that view.
$1050 probably represents one of the more bearish predictions. The most likely scenario is for ranging but in the short term prices are trending towards the June low