-- Posted Thursday, 11 April 2013 | | Disqus

Spot the conspiracy by the global leaders of the financial community to get behind the Bank of Japan’s QE initiative and keep the gold price in check, while delivering cheaper gold to the central banks who still want to buy it.

After all the news of Cyprus selling 13.9 tons of gold rather pales into insignificance alongside the record 540 tons total in purchases by global central banks last year.

Goldman’s warning

Goldman analysts wrote yesterday: ‘Despite resurgence in euro-area risk aversion and disappointing US economic data, gold prices are unchanged over the past month, highlighting how conviction in holding gold is quickly waning. While higher inflation may be the catalyst for the next gold cycle, this is likely several years away.’

The Wall Street bank reduced its 2013 gold estimate to $1,545 an ounce from $1,610 and cut its 2014 forecast to $1,350 from $1,490. For good measure it recommended a short Comex gold position targeting $1,450 with a stop at $1,650.

We recall warnings from gold guru Jim Sinclair about how the major bullion banks would seek to take down gold one last time before a sudden reversal of their position later. After all Goldman last did this in January, how short is market memory (click here). This is what is happening again now.

It does not need much imagination to see how that reversal would come about. Ex-Goldman IMF chief Christine Lagarde yesterday characterized the global economy as running at three levels: fast in the emerging markets, OK in some countries and still weak in the eurozone.

Global recovery?

The assumption behind what Goldman is saying about gold is that the global economy is now on a recovery path. What will happen when the truth is out? All the BRICS economies are slowing down from formerly high growth, the US recovery is an illusion created by money printing and the eurozone has not seen anything like the worst of its crisis yet (that’s to come in Italy and Spain).

Will that keep inflation low and the lid on gold prices? Well not if the Bank of Japan’s $1.4 billion QE program last week is any indication. There is a tsunami of money coming. Gold and silver as the only money that cannot be printed are the obvoius winners, and Goldman stands no more success at turning back this tide than the legendary King Canute.

Not for the first time Goldman Sachs is playing its own book. After knocking the gold price down it is only too easy for Goldman to reverse course as it did in January and say that it is time to buy again as market conditions have changed in favour of gold.

-- Posted Thursday, 11 April 2013 | Digg This Article

About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in 1999 to complete his first book, a history of the Bovis construction group.

Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.

Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.

He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.

Order my book online from this link

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