Goldman Goes Short Gold.

The commodity team at the Goldman Sachs is out with a note stating that the time is right to short gold. As reported at FT.com.

Turn in gold prices accelerating; closing our long gold position
Given gold’s recent lackluster price action and our economists’ expectation that the acceleration in US growth later this year to above-trend pace will support US real rates, we are lowering our USD-denominated gold price forecast once again. Our new forecast is further below the forward curve with year-end targets of $1,450/toz in 2013 and $1,270/toz in 2014. As a result, we recommend closing the long COMEX gold position that we first initiated on October 11, 2010 for a potential gain of $219/toz, with the risk reversal overlay expired on March 25. Our long-term gold price forecast (2017+) remains at $1,200/toz: while higher inflation may be the catalyst for the next gold cycle, this is likely several years away.

Initiating a short COMEX gold position as our ECS Top Trade #8
While there are risks for modest near-term upside to gold prices should US growth continue to slow down, we see risks to current prices as skewed to the downside as we move through 2013. In fact, should our expectation for lower gold prices continue to prove correct, the fall in prices could end up being faster and larger than our forecast, as aggregate speculative net long positions across COMEX futures and gold ETFs remain near record highs. We therefore recommend initiating a short COMEX gold position as our ECS Top Trade #8, implemented through an S&P GSCI® front-month rolling index to further benefit from the contango in the COMEX future curve, targeting a move to $1,450/toz with a stop at $1,650/toz. While we may be end up too early in entering this trade, we prefer that to being late given our belief that the skew to current prices is to the downside.

It appears the thesis that Goldman is stating is nothing new, i.e. an improvement in the economy and market micro-structures in the gold complex will lead to lower prices. Strangely enough, the thesis also seems to be based on taking ruler and drawing straight lines, as shown in this excerpted chart below



All puns aside, I think it is good to immerse yourself in all sides of a thesis to round out your own thoughts. Hell, you might even find you are wrong. However, this report- as it really brings nothing new to the bear thesis- does not change my mind on long-term the long-term prospects for either the precious metal or gold stocks.