Is This A Bullish Sign For Gold

From an interesting article on Zerohedge, it appears that Goldman Sachs is advising their clients to “sell gold” as the gold cycle is expected to turn in 2013. The fascinating part of the story is that no additional easing is needed based on the prospects of the growth in the US. That seems a little bit (to say the least) contradictory compared to Mr Geithner who was talking about unlimited debt limits only a week ago.

The Zerohedge piece points to another interesting fact, as brought forward by Goldman Sachs:

Gold prices have remained range bound in 2012, despite a steady decline in US real rates and rise in central bank holdings that would ordinarily be supportive.

On GoldSilverWorlds, we just published the updated figure on negative real interest rates. Between 2001 and October 2012, 58% of the months have witnessed negative real interest rates, the perfect environment for a rise in gold. This is the historical chart that relates the gold price with negative real interest rates.

 Gold vs Interest Rates

Earlier this week, Deutsche Bank (which is the biggest bank worldwide in terms of assets) reported their bullish outlook for gold just because of the environment of negative real rates.

Indeed, the gold rice was rather steady in 2012. But we believe that the parabolic rise in 2011 had to be “digested” allowing the “bull market” to continue its powerful upward rise. It’s important to note here that in 2012, it became clear that “smart money” and central banks have been accumulating massively gold on the price dips. We have reported this numerous times throughout the year:

We strongly believe that 2012 was healthy correction year for gold in which it was clearly proven that the asset is not at all in a bubble. A massive gold accumulation move coming from China, some big funds and the central banks have shown their belief in the real benefits of gold.

What is more interesting, is another piece on Zerohedge showing the detailed gold price evolution on December 4th. We would like to know to which extent the trading algorhythms that are used by the big financial institutions (think of JP Morgan, Goldman Sachs, ea), account for the fact that the gold price is not rising sharper than it is now? See our latest piece: Gold Price Manipulation Proven On The Intraday Charts.

Taking it all together, it makes us rather suspicious on Goldman’s “sell” signal.


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