Goldman Sachs

Goldman Sachs: About 20 Years’ Worth Of Known Mineable Gold Left

Leading global investment banking, securities, and investment management firm Goldman Sachs has put the spotlight back on gold and other prized commodities. Myra P. Saefong reported on the MarketWatch website this morning:

In another two decades, rare commodities may become seriously scarce.

According to Goldman Sachs, the world has about 20 years’ worth each of known minable reserves of gold, diamonds and zinc. Platinum, copper, nickel reserves only have about 40 years or less left.

“The combination of very low concentrations of metals in the Earth’s crust, and very few high-quality deposits, means some things are truly scarce,” Eugene King, European metals and mining analyst at Goldman Sachs, wrote in a recent research note…

(Editor’s note: Bold added for emphasis)

Could “peak gold” really have arrived? Regular observers of the precious metal shouldn’t be surprised to hear of its mention. Lawrence Williams reported on Mineweb.com (web-based international mining publication focusing on mining financial and corporate news and comment) back on March 25, 2013:

A new study from research and data provider IntierraRMG has pointed to a disturbing trend in terms of a decline in new global discoveries and in particular in gold grades. According to a study which covers announced gold deposit finds over the past 10 years, this decline has been accelerating over the past four years and if the trend continues, which seems likely as the easier-to-find deposits have perhaps mostly already been discovered, then the future of global mined gold supplies will gradually become affected. Indeed global production of mined gold has been plateauing and although running at or around its historic high levels, as the amount of new gold being found diminishes, then global production levels may not be sustainable beyond the next few years unless there is a dramatic turnaround in discoveries

(Editor’s note: Bold added for emphasis)

Last fall, the chief executive of the world’s biggest gold miner (by market capitalization) was warning of “peak gold.” Alistair MacDonald reported on The Wall Street Journal website on September 8, 2014:

Miners have reached “peak gold,” in which production of the precious metal has hit its high as easy-to-mine gold deposits become harder to find, said Chuck Jeannes, chief executive of Goldcorp, the world’s largest gold miner by market capitalization.

Mr. Jeannes said in an interview that a falloff in supply will support the gold price, but make mining it even harder and lead to further consolidation in the industry…

“Whether it is this year or next year, I don’t think we will ever see the gold production reach these levels again,” he said. “There are just not that many new mines being found and developed.”

(Editor’s note: Bold added for emphasis)

If “peak gold” is truly taking place here, there’s a good chance investors are going to pay more attention to the shiny yellow metal going forward.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s note: I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

Sources:

Saefong, Myra P. “In 20 years, the world may run out of minable gold.” MarketWatch. 31 Mar. 2015. (http://www.marketwatch.com/story/in-20-years-the-world-may-run-out-of-minable-gold-2015-03-30). 31 Mar. 2015.

Williams, Lawrence. “New gold discoveries declining at accelerating rate – IntierraRMG.” Mineweb. 25 Mar. 2013. (http://www.mineweb.com/archive/new-gold-discoveries-declining-at-accelerating-rate-intierrarmg/). 31 Mar. 2015.

MacDonald, Alistair. “Goldcorp CEO Jeannes Sees “Peak Gold” in Sector This Year or Next.” The Wall Street Journal. 8 Sep. 2014. (http://www.wsj.com/articles/goldcorp-ceo-jeannes-sees-peak-gold-in-sector-this-year-or-next-1410188689). 31 Mar. 2015.

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Marc Faber Declares ‘I Want To Own Some Gold Because I Don’t Trust The Financial System Anymore’

Swiss-born investment advisor/money manager Marc Faber was on the Bloomberg Television show Street Smart last week. The publisher of the monthly investment newsletter The Gloom Boom & Doom Report talked with host Trish Regan about a number of financial topics, including gold. From their exchange:

REGAN: I know you have been bullish on gold for pretty much forever, Marc. But now we’re in a situation where gold is at a 4-year low. Goldman now predicting $1,050 an ounce. SocGen saying 1,000 bucks. Where do you see gold finishing the year?
FABER: I would say Goldman Sachs is very good at predicting lower prices when they want to buy something. But that aside, I would say, yes- we are down from $1,900 to $1,160 or something like this, and it’s been a miserable performance since 2011. However, from the ’99 lows we’re still up more than four times. So, I just looked at performance tables over 10 years and 15 years- gold hasn’t done that badly. Has done actually better than stocks. Now I personally, I think that we may still go lower- it’s possible, I’m not a prophet. But I’m telling you- I want to own some gold because I don’t trust the financial system anymore. I think the whole thing is going to collapse one day. And then I’ll be happy to have some assets. But of course the custody is important. I wouldn’t hold my gold at the Federal Reserve because they will lend it out. I wouldn’t hold my gold in the U.S. at all.


“More Americans ‘Can’t Afford’ to Buy Homes, Faber Says”
(Gold discussion begins at 7:30)
Bloomberg Television Video

This isn’t the first time Dr. Faber has warned about storing gold in the United States. He told CNBC’s Amanda Drury on August 16, 2013:

I have a preference for physical gold held in a safe deposit box outside the United States and preferably in Asia, for a variety of reasons.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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Goldman Sachs Misses Big On 4 Of Last 5 Year-End Gold Price Predictions

Speaking of Goldman Sachs this evening, yesterday I caught their year-end price forecast for an ounce of gold. Jeff Morganteen wrote on the CNBC website Monday afternoon:

Bad news for “gold-bugs”- bullion’s current beginning-of-the-year rally will not only lose steam, but prices could drop sharply by the end of 2014, according to Goldman Sachs’ Jeffrey Currie.

Currie, Goldman’s head of commodities research, told CNBC on Monday he had an end-of-year price target of $1,050 per ounce for gold, a 16 percent drop based from current prices of $1,251. The main culprit? Economic recovery…

I used to blog about these “end-of-year price targets” for gold from the major financial institutions starting back in early 2007, when I ran Boom2Bust.com, “The Most Hated Blog On Wall Street.”

Not so much anymore.

Why’s that? I’m not sure. Perhaps it was because I felt the many forecasts I blogged about over time weren’t turning out to be too accurate.

After reading that Goldman Sachs year-end gold price prediction, I decided to dig up this particular financial institution’s forecasts- made almost a year in advance- for the last five years. What I found pretty much confirmed my suspicions:

2009 Goldman Sachs year-end gold price forecast? $795
New York spot gold price on December 31, 2009? $1,096.20
Goldman Sachs off (under) by $301.20

2010 Goldman Sachs year-end gold price forecast? $1,350
New York spot gold price on December 31, 2010? $1,421.60
Goldman Sachs off (under) by $71.60

2011 Goldman Sachs year-end gold price forecast? $1,690
New York spot gold price on December 30, 2011? $1,566.40
Goldman Sachs off (over) by $123.60

2012 Goldman Sachs year-end gold price forecast? $1,940
New York spot gold price on December 31, 2012? $1,675.20
Goldman Sachs off (over) by $264.80

2013 Goldman Sachs year-end gold price forecast? $1,800
New York spot gold price on December 31, 2013? $1,205.50
Goldman Sachs off (over) by $594.50

Except for its 2010 end-of-the-year gold price prediction, Goldman Sachs was off by more than $100 in its forecasts for the other four years.

Most striking was the 2013 prediction, where the New York City-based multinational investment banking firm was off by almost $600.

I’m not trying to give Goldman Sachs a hard time over these forecasts. If anything, I want to use this example to share with you a lesson I learned a long time ago observing gold, which is how incredibly difficult it is to successfully predict the price of an ounce of gold a long way out.

And to do it on a regular basis? Does such talent even exist?

I would think if it did, Goldman Sachs would employ it.

Down the road, I’ll look at other year-end gold price forecasts from other major financial institutions and do the 5-year comparison with them. Who knows? One of them might turn out to be relatively accurate with their predictions, and able to do it consistently.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Morganteen, Jeff. “Gold to tank in 2014: Goldman Sachs.” CNBC.com. 13 Jan. 2014. (http://www.cnbc.com/id/101331595). 14 Jan. 2014.

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Tuesday, January 14th, 2014 Commodities, Precious Metals, Recovery No Comments

Doubts About Sustainable Housing ‘Recovery’ Linger

My doubts about the U.S. economy being in any sort of sustainable recovery able to stand on its own without government and central bank intervention spill over to the housing sector.

As it concerns real estate, a lot of that pessimism stems from the following that I’ve heard being discussed (albeit, somewhat quietly) for some days now but which popped up in my Sunday paper this weekend. From one of my favorite real estate reporters, Mary Umberger, over at the Chicago Tribune:

Halfsies. If you’re among those who think we’re in the midst of some kind of “normalization” of the real estate market, I offer you the conclusions of Goldman Sachs investment banking firm, which estimates that more than half of all recent real estate transactions nationwide have been all-cash deals, without mortgages.

Its report found that all-cash deals hit 57 percent in the first quarter of 2013, compared with 19 percent in the first quarter of 2005.

Such sales appear to be concentrated at the lower end of the price scale, Goldman Sachs said, and reflect the efforts of investors who are buying more modest homes to rent out.

(Editor’s note: Italics added for emphasis)

57 percent all-cash deals? During the housing bubble’s heyday, I seem to recall hearing of individuals who couldn’t even afford to buy a new TV somehow getting mortgages for new McMansions.

I just can’t see your typical homebuyer plunking down all cash for a home. So if investors are fueling this housing “recovery,” well, let’s just say my doubts concerning a sustainable residential real estate comeback continue to linger. Especially if mortgage rates continue to climb higher.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Umberger, Mary. “From remodeling lows to Florida highs.” Chicago Tribune. 30 Aug. 2013. (http://www.chicagotribune.com/classified/realestate/sc-cons-0829-umberger-20130830,0,6086796.column). 9 Sep. 2013.

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Monday, September 9th, 2013 Business, Housing, Recovery No Comments

Gold Price Forecasts Gone Schitzo

Seeing that gold prices are somewhat schizophrenic these days, I thought I’d surf the Internet to see what some of the “big” financial institutions are predicting concerning the direction the precious metal might take. I found there to be no shortage of gold price forecasts out there. From the MarketWatch blog The Tell on Tuesday:

Goldman slashed its three-month gold-price forecast to $1,615 an ounce from $1,825, its six-month forecast to $1,600 an ounce from $1,805 and its 12-month forecast to $1,550 an ounce from $1,800…

Also on Monday, a BofA Merrill Lynch Global Research report said the larger bull trend for gold remains intact. “From the perspective of contrarian opinion analysis, a bottom and bullish turn in gold is close at hand.”

And Morgan Stanley said gold prices are “nearing the bottom of their trading range of US$1,540/oz to US$1,800/oz.”

At UBS, analyst Julien Garren said a major gold rally is coming in the third quarter.

Last week, though, Citi was talking price hibernation for gold, as news that George Soros and another big hedge fund were backing off gold.

There’s also this from Bloomberg on the Taipei Times (Taiwan) website yesterday:

An inevitable unwinding of gold’s 12-year bull market has begun, Credit Suisse Group AG said on Thursday in a report.

Geez. Even these forecasts are all over the place.

As far as I can tell, the underlying fundamentals behind gold’s generally steady rise are still intact. The world’s central banks have the printing presses going at full speed in what some are calling a new global currency war. And just this Tuesday Federal Reserve Chairman Ben Bernanke reaffirmed his support for the central bank’s $85 billion bond-buying program, or what’s come to be known as QE4.

Yep, the yellow metal still has some glimmer left to it it seems

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s note: I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

Sources:

“Gold forecast melee: Goldman joins in, slashes forecast to $1,550.” The Tell. 26 Feb. 2013. (http://blogs.marketwatch.com/thetell/2013/02/26/gold-forecast-melee-goldman-joins-in-slashes-forecast-to-1550/). 27 Feb. 2013.

“Gold’s price cycle likely to have turned: analysts.” Bloomberg. 27 Feb. 2013. (http://www.taipeitimes.com/News/biz/archives/2013/02/27/2003555794). 27 Feb. 2013.

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Big Banks Warned Of Coming Economic Collapse?

Some of my colleagues are pointing to the following story about big U.S. banks being directed to develop “recovery plans” as these institutions being warned about a soon-to-be-coming economic collapse. Rick Rothacker wrote on the Reuters website on August 10:

U.S. regulators directed five of the country’s biggest banks, including Bank of America Corp and Goldman Sachs Group Inc, to develop plans for staving off collapse if they faced serious problems, emphasizing that the banks could not count on government help.

The two-year-old program, which has been largely secret until now, is in addition to the “living wills” the banks crafted to help regulators dismantle them if they actually do fail. It shows how hard regulators are working to ensure that banks have plans for worst-case scenarios and can act rationally in times of distress.

Note the two years. Rothacker added:

According to documents obtained by Reuters, the Federal Reserve and the U.S. Office of the Comptroller of the Currency first directed five banks – which also include Citigroup Inc., Morgan Stanley and JPMorgan Chase & Co – to come up with these “recovery plans” in May 2010.

They told banks to consider drastic efforts to prevent failure in times of distress, including selling off businesses, finding other funding sources if regular borrowing markets shut them out, and reducing risk. The plans must be feasible to execute within three to six months, and banks were to “make no assumption of extraordinary support from the public sector,” according to the documents.

So, have these large financial institutions been given a heads-up by Washington and the Fed about a rapidly-approaching economic crash?

I don’t know. All of this could just be a drawn-out reaction to the Lehman Brothers fiasco of 2008.

That being said, I do expect more carnage in the financial system as the economic crisis marches on.

Source:

Rothacker, Rick. “Exclusive: U.S. banks told to make plans for preventing collapse.” Reuters. 10 Aug. 2012. (http://www.reuters.com/article/2012/08/10/us-banks-recoveryplans-idUSBRE87905N20120810). 15 Aug. 2012.

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Wednesday, August 15th, 2012 Bailouts, Banking, Federal Reserve, Government, Recovery No Comments

Goldman Sachs’s Hatzius Still Predicts June Quantitative Easing

Goldman Sachs’s chief economist not only expects more quantitative easing by the U.S. central bank, but he even thinks it will be announced this week. Mark Bentley wrote on the Bloomberg website earlier today:

The Federal Reserve is expected to start a new asset purchase program at a meeting this week, Goldman Sachs Group Inc. (GS) chief economist Jan Hatzius said.

The Fed may expand its balance sheet, extend its so-called Operation Twist and/or lengthen its short-term interest rate guidance beyond late 2014, Hatzius said in an e-mailed report to clients today.

I wonder what they’d call it? Anything but QE3, right? Regardless, the German-born Hatzius would still classify it as easing.

This would be consistent with a forecast made by Hatzius back in April. I blogged back on April 4:

But going back to the U.S. central bank’s minutes dashing hopes for a third round of quantitative easing, I happened to spot the following on the International Business Times website late this morning. From the IBTimes Gold global gold portal:

The modest rebound in the markets coincided with the release of a note by Jan Hatzius, Goldman Sachs’ chief U.S. economist. Hatzius, who recently predicted that the Ben Bernanke-led central bank will launch QE3 by June of this year, reiterated his monetary policy forecast in spite of Tuesday’s Fed minutes.

Commenting on the latest developments, Hatzius acknowledged that “Minutes from the March 13 FOMC meeting showed that the committee did not discuss monetary easing options in detail, in contrast to our expectations… March FOMC minutes make easing at April meeting unlikely without substantial deterioration in the outlook.”

However, the Goldman Sachs economist went on to say that “Officials’ views on the (economic) outlook were only a little more upbeat than previously.” In summary, Hatzius asserted that “an announcement of additional asset purchases remains our baseline, with June the most likely timing at this point.”

(Editor’s note: Italics added for emphasis)

It’s thought quantitative easing may boost asset prices.

We’ll know if Hatzius’s forecast is correct by the end of the day Wednesday.

(Editor’s note: I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

Source:

Bentley, Mark. “Fed May Extend Operation Twist, Grow Balance Sheet, Goldman Says.” Bloomberg. 19 June 2012. (http://www.bloomberg.com/news/2012-06-19/fed-may-extend-operation-twist-grow-balance-sheet-goldman-says.html). 19 June 2012.

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Survival And Prosperity
Est. 2010, Chicagoland, USA
Christopher E. Hill, Editor

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