Goldman Sachs tells clients: Stop shorting gold

Goldman Sachs has advised clients to stop shorting gold after the dramatic fall in the price of the precious metal over the last few weeks.

Reversing a call made about two weeks ago to short the commodity, Goldmans is now advising investors to close short positions after the gold price climbed back above $1,400.

It said in a note to clients: “We have closed our recommendation to short COMEX Gold, as prices moved above the stop at $1,400/toz.”

The gold price dived to a low of $1,322 earlier this month, but it has since bounced, and today it was trading at $1,423 by 10:45am.

Investors exited en masse in April, but the price has been declining steadily since last October when fears about the future of the eurozone prompted a shift into safe havens such as gold.

As a result of lessening fears about the future of the single currency bloc, the price of gold has come down around 20% at current prices from its 52-week high of $1,796.

Goldmans added to the bearish sentiment just weeks ago when it advised investors to short the precious metal, while simultaneously slashing its forecasts.

Having booked a profit on the trade, it is no longer short at these levels, although it expects further declines at some point.

“We have exited the trade significantly below our original target of $1,450/toz, for a potential gain of 10.4%,” it said.

“The move since initiation was surprisingly rapid, likely exacerbated by the break of well-flagged technical support levels. Our bias is to expect further declines in gold prices on the combination of continued ETF outflows as conviction in holding gold continues to wane, as well as our economists’ forecast for a reacceleration in US growth later this year.”

 

This article was first published on Investment Week

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