Is Deflation Looking to Pop the Gold Bubble?

whiskeyandgunpowder.com,

If Goldman Sachs is publicly bullish on gold, is that a good thing or bad thing for gold bulls?

Wall Street’s notorious trading house published a report on gold last week setting a price target of US$1,300 in the next six months. The report cited several factors. But before we get into them, we’ll confess it made us a bit nervous. Whenever any broker is saying one thing, you have to wonder if they’re actually doing the opposite.

That said, Goldman did make a point that is true of an asset in a bull market: it requires corrections to shake out the speculators and weak hands from time to time. Following the June high north of $1,250 the net speculative long positions declined. Traders took profits. And so did momentum players in the exchange traded funds market.

But then something happened that Michael Pascoe and Rory Robertson did not expect. The gold bubble did not pop. Because it’s not a bubble. The momentum players departed and the price found plenty of support. It’s now around US$1,220. (more)