JP Morgan, Goldman, Bank of America Turn Bullish On Precious Metals

What a difference one day and one person makes. It was only a week ago that Goldman Sachs’ head of commodities research appeared on Bloomberg TV with his bearish outlook on the commodities sector. Specifically for gold, his outlook appeared to be below $1,000 per ounce. The interview was here Goldman sees risk of gold below $1,000 as economy gains.

Now that Mr. Bernanke announced not to slow down his asset purchases which runs at the rhythm of roughly 1 trillion US dollar per year, the bearish outlook of several major banks has turned bullish, at least in the short and mid-term.

Below are three examples. It is no coincidence that these are among the largest banks globally and that they have huge derivatives positions. However, don’t take this as financial advice, as it wouldn’t be the first time that these statements have proven to be pitfalls for investors. Also, understand that these banks are in the game of trading; they don’t have any interest in the monetary protection of the metals.

Bank of America says bearish view was incorrect

“The Wednesday Bullish Candlestick formations (Bullish Engulfing Candles) in gold and silver say that our bearish view on precious metals now incorrect. Indeed, this is supported by the US $ breakdown and the increasingly constructive environment for risk assets generally. As such, we are cutting our Silver Short and moving to the sidelines. Silver should see a test of long term resistance at 24.24/26.23, in the sessions and weeks ahead while gold should re-test its 1433, August highs. In both cases, watch trendlines at 23.20 & 1375. A close above confirms the bullish candles and upside trajectories.”

JP Morgan turned tactically long commodites

“The strong rebound in J.P. Morgan’s global manufacturing PMI, improving physical demand and our economists’ first upgrade of Chinese growth expectations since February make us turn tactically overweight. This is especially important for base metals and copper in particular given China’s very large share of global metal demand and thus, we go overweight base metals and copper in addition to our longstanding energy overweight. We also close our underweight in precious metals given positive momentum, cleaner positions and the impending start to the debt ceiling negotiations. In our commodities portfolio, this leaves us OW energy and base metals, neutral precious metals and UW agriculture, where high prices coupled with better weather conditions compared to last year have led to a large increase in supply expectations.”

Goldman Sachs sees near term upside but still bearish into 2014

“The FOMC unexpectedly decided not to taper the rate of its asset purchases, preferring to wait for further confirmation of improvement in the US economic outlook. This announcement, as well as Bernanke’s press conference, was more dovish than most had expected, pushing gold prices to $1,365/toz. The decision, combined with the upcoming debt ceiling debate, leaves risks to gold prices as skewed to the upside in the near-term.”

“However, with gold prices already back near their pre-June FOMC level, COMEX net speculative positioning already back at its April level as well as growing pressures on EM gold demand, we believe that this upside will ultimately prove limited. We believe this is well illustrated by today’s more muted rally in gold prices when compared to the significant rally in 10-year TIPS yields, helping close the significant valuation gap that had occurred between both assets over the past month. As a result, we re-iterate our neutral stance on gold prices and continue to expect that gold prices will resume their decline heading into 2014 when we expect economic data to solidly confirm a reacceleration in US growth and warrant a less accommodative monetary policy stance.”

Courtesy: Zerohedge

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