On Thursday it was reported that gold is “the favorite commodity to trade” for Jeffrey Currie, head of commodities trading for Goldman Sachs.
Gold is Goldman Sachs’ favorite commodity
Goldman Sachs continued to reiterate its bullish outlook for gold with the firm ’s global head of commodity Jeffrey Currie saying in an interview with Bloomberg TV that the yellow metal is his favorite commodity to trade.
“There are a lot of reasons to still hold gold,” he said in the interview. “Foremost is that you are still seeing the debasement effects of all the stimulus measures.”
The latest comments from Currie don ’t come as a surprise as the investment bank has been fairly bullish on gold since the start of the year.
In March, as the Federal Reserve dropped interest rates to the zero-bound target and introduced unlimited quantitative easing measures, Goldman Sachs described gold as “the currency of last resort.”
In its March report, the analysts said that they see gold prices pushing to $1,800 an ounce within the next 12 months.
At the time that report was released, gold was currently trading well above $1,600 per ounce. This means that these “gold bulls” were predicting a pathetic 10% year-over-year gain for their “favorite commodity”.
You could make more than that on just one intraday swing in the crude oil market. In today’s environment of instant-gratification, momentum-chasing, get-rich-quick traders, who wants to invest for a full year to reap a measly 10% profit?
Meanwhile, this is what real
“gold bulls” are saying when it comes to predicting a gold price.
$2,000 per ounce in 2020 or early 2021
$3,000 per ounce within 18 months
$3,000 - $5,000 “if not a lot higher”
- Eric Sprott, Sprott Asset Management, April 2020
$8,000 - $9,000 per ounce within the next 5 to 10 years
- Thomas Kaplan, founder of The Electrum Group, May 2019
- Florian Grummes, managing director Midas Touch Consulting, May 2020
Then we have the “gold bulls” at Goldman Sachs. They came out with their bold prediction in March 2020 that the price of gold could rise all of 10%. And that’s after giving several reasons why now is a particularly good time to be holding their “favorite commodity”.
“damning with faint praise” (Wikipedia)
- Damning with faint praise is an English idiom, expressing oxymoronically that half-hearted or insincere praise may act as oblique criticism or condemnation
What are we to conclude from Goldman Sachs’ gold price prediction?
- Goldman Sachs doesn’t like commodities. It sees only a 10% gain on the horizon for its “favorite commodity”.
- Goldman Sachs doesn’t know much about commodities. As noted, it would be easy to scalp a 10% intraday trade in the crude oil market. Why wait a whole year to make (supposedly) only 10% on gold?
- Goldman Sachs should be ignored when it comes to commodities in general, and gold in particular.
There are many reasons to hold gold right now.
Unprecedented economic uncertainty.
Unprecedented monetary inflation.
Unprecedented safe-haven demand.
Ultra-strong supply/demand fundamentals.
There are a number of voices worth heeding when it comes to analysis of the gold market. Goldman Sachs isn’t one of them.