Goldman
Channels FDR's `Nothing to Fear' With Sell Gold Call
February 15, 2016 — 7:10 PM PST Updated on February 15, 2016 — 9:14 PM PST
· New fears, like past fears, are not justified, Goldman says
· Bullion is seen dropping to $1,000 in 12 months, bank saysShare on Facebook
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Goldman
Sachs Group Inc. says it’s time to bet against gold as bullion’s rally to
the highest level in a year isn’t justified, backing the bearish
call with a comment from a former U.S. leader in a report that was issued,
appropriately enough, on Presidents’ Day. Prices tumbled.
Gold
will slump back to $1,100 an ounce in three months and $1,000 an ounce in 12
months, analysts including Jeffrey Currie and Max Layton wrote in the
report that was dated Feb. 15 and received on Tuesday. It was headlined
with a remark from former President Franklin D. Roosevelt.
There’s
“nothing to fear but fear itself,” the analysts entitled the seven-page note,
channeling comments from Roosevelt’s 1933 inauguration when the U.S. economy
was being ravaged by the Great Depression. “It’s time to sell the fear
barometer,” the bank said, and recommended shorting gold.
Gold
jumped to highest since February 2015 last week as sinking equity markets,
weaker oil prices, and diminished bets for higher U.S. borrowing costs spurred
haven demand. Prices were further boosted by the spread of negative interest
rates and concerns about a crisis in Europe’s banks. Goldman said it still
expected rates to rise, putting the odds of U.S. recession at just 15 to 20
percent, and rejected the notion that a re-run of the crisis was likely.
‘Not Justified’
“We
believe that these new fears, like past fears, are not justified,” the analysts
wrote, saying that financial markets had overreacted. “Systemic risks stemming
from the collapse in oil and commodity prices are extremely small.”
Gold
for immediate delivery sank as much as 1.5 percent to $1,191.02 an ounce and
traded at $1,193.52 at 1:09 p.m. in Singapore. It’s down from $1,263.48 on Feb.
11, the highest price since February 2015. Goldman’s targets for bullion are
the same as those given by the bank in a note last week, when it said that U.S.
rates will still rise..
Quelle: goldmansachs.com
Quote:
In a note to clients late yesterday titled “Nothing to fear but fear itself,” Goldman’s Jeffrey Currie says that the fear guiding global financial markets right now “ignore the facts that systemic risks from oil, China and negative rates are very unlikely.”
Currie says that the negative macro impacts from low oil prices have likely already played out and are not systemic; the spillover from the Chinese economy slowing down is limited; and that the U.S. economy is far from a recession.
“Financial markets have overreacted to the point that current inflation breakevens would require oil prices to keep declining for the next 7 years.”
“We believe that the sharp rise in gold prices this past week was mostly due to concerns over systemic risks, particularly in the banking sector, given the sharp correlation of gold prices with bank stocks and other measures of systemic credit risks. While this is a continuation of a trend established since the beginning of the year that started with systemic concerns over oil and China, we believe that these new fears like the past fears are not justified.”
Currie says we’re likely heading for a bounce once the market realizes that European banks, which are currently at the center of concerns over negative interest rates, are still able to fund themselves and that money markets are open with no evidence of strain in either euro or dollar funding..
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