Goldman Closes "Short Gold" Recommendation With 4.5% Loss; Will Continue Buying Gold From Its Clients

Back on February 15, just as the USD was about to plunge unleashing a global risk-on rally as a result of "Yuan stability", Goldman triumphantly announced its latest trading recommendation: short gold (at $1,205) with a target of $1000 and a 7% stop loss.

This being Goldman - the one hedge fund whose prop traders immediately take the other side of all trades pitches to clients - said clients were immediately and brutally taken to the cleaners as the consequence of a tumbling dollar (another trade that Goldman got disastrously wrong) was soaring gold. And that is precisely what happened. After that, unofficially, it took just two and a half months for Goldman to get stopped out of its short gold recommendation, which as we first noted, happened on April 29, when its the price soared above $1,300 breaching Goldman's stop. Officially, Goldman's Jeff Currie decided to take his time, although he too finally threw in the towel today admitting Goldman was wrong yet again with one more trading recommendation (recall that Goldman had earlier been stopped out and lost money on 5 of its Top 6 trades for 2016 in just over a month).

But instead of doing the right thing and also admitting it has zero idea how to trade gold, where it will go next or what the catalysts are, Goldman decided to change its price targets, and instead of predicting $1,100/oz in three months, Goldman has generously pushed its price target by $100 higher to $1200 (and $1,050 over 12 months), even as gold traded just shy of $1300 a few days ago and only dropped as a result of the recent USD rally.

In other words, Goldman admits it was wrong, but still remains indirectly short as it is still hoping to skewer even more muppets on the very same trade it has gotten wrong for the past 3 months... and in the process buy their gold if possible.

Here is the "explanation"

Our US economists recently reduced their forecast for Fed funds rate hikes over the next 12 months from 100 bp to 50 bp. Corresponding with this, our global rates team has lowered its forecast profile for 10-year US real rates over the same period. As a result, we reduce the downside to our gold price forecast, raising the 3/6/12 month forecast profile to $1,200/1,180/1,150/oz from $1,100/1,050/1,000/oz. Our new year average price forecasts are $1,202/1,150/1,150/oz from $1,124/1,000/1,050/oz. Though we forecast that gold prices will decline from spot over the next 3-12 months (with c.5%-9% downside), for reasons which we detail below, the changes to our economists' rates forecasts act to reduce the degree of downside to our modeled gold price profile and thus change the risk-reward of our previously implemented short gold trade recommendation (published February 15), which we close as a result at a c.4.5% loss.

Or, you could have simply remembered that you had a 7% stop and that you were stopped out 2 weeks ago, which any trader would know very well if he actually had the trade on instead of just using it as bait for clients to unload their gold. Perhaps Mr. Currie can also tell us what Goldman's "flow" trader P&L was on the "short gold" trade. 

On the other hand, since nothing could have been more bearish for gold than Goldman going outright long the metal, we are delighted that Goldman is still buying gold - as it asks its clients to sell it their gold - because it means that the upside for gold remains unlimited. This is also the opposite of what Goldman has tried to - yet again - convince the handful of Kermits who bother to even listen to the taxpayer bailed out hedge fund with the worst trading recommendation record since Tom Stolper (incidentally another former Goldmanite) and of course Dennis Gartman.

For those who care, this is what else Currie said - it is mostly a verbatim copy of what he said in mid-February with the exception that he now admits he was wrong then, and that he is "rising" his target price by $100.

This next sentence is our favorite:

In addition, there are reasons to believe that the risk off environment which contributed to gold's outperformance at the beginning of this year is less likely to repeat in the near future as confidence in Chinese growth, Chinese currency stability, and the potential for a collapse in oil prices is much reduced.

Why is it our favorite? Because just a few hours earlier another Goldman report warned that in its quest to keep the bond market stable, central banks may unleash "Financial Turbulence" and "Rate Shock." We can only assume that Currie had no idea. It's almost as if Goldman doesn't even bother to pretend to have a coherent story when ripping clients off.

As for Goldman's vapid, deja vu conclusion...

In terms of risks surrounding our bearish gold view, we view them as broadly balanced. An upside risk to our forecast is that lower-than-expected Chinese growth significantly impacts US equities, consumer confidence, and growth, thereby resulting in lower increases in real rates relative to our forecast profile. A downside risk relative to our base case is a large reduction in the pace of Chinese and Russian central bank buying (since mid last year, buying has been running at a very high rate of c.450 tonnes per annum).

... it is missing just one thing: what is Goldman's next stop loss, because that is where gold is really headed next.