by David Engstrom:
On April 10, Goldman Sachs came out with a recommendation to short gold. On April 23, Goldman closed the recommendation. What kind of financial advice is good for just 9 business days? Truth be told, the recommendation contributed to a rapid decline in the gold price. A decline promptly met by record demand for physical gold. OOOPS!
Some speculate the recommendation was an attempt to manipulate prices lower in order to create a buying opportunity. That’s why I think manipulation is overrated. Eventually, the truth prevails. In this case that truth is, the trades Goldman encouraged were trades for paper gold not physical gold. Short-selling in the futures market is what helped to plunge the spot price of gold. Real gold investors, however, did not go for the head-fake. Demand for physical gold skyrocketed so fast that Goldman had to close its recommendation in 6 days.
Now let’s do a little speculating of our own. If the intent of the recommendation was to create a physical gold buying opportunity at lower prices, that attempt seems to have failed. In this case, the ...