Goldman Sachs No Longer Short

Dear Fellow Investor:

Below is an analysis by Adrian Douglas, a guy I've met, and who runs www.marketforce.com, a serious analytical outfit.  IF…IF… GS (more affectionately known in the business as Hannibal Lecter) is now actually long gold after BS'ing their clients for years about selling gold or even shorting gold…the result could be that prices of gold and shares that have been dumped by a zillion hedge funds and mutual funds…are poised for an explosion.   This would create a total reversal of the thinking of every "gold-is-a-barbarous-relic" Wall Street MBA who has now looked around and realized that normal "diversification" didn't do squat to help them on the 777 down day on Monday, and that maybe, just maybe there's something to this gold as an insurance policy story.

And hopefully, our long national nightmare can be over…

Mike McGowan

[POG below means price of gold]

"GOLDMAN SACHS GOES NET LONG GOLD ON TOCOM"

In the September 29 session on the TOCOM Goldman Sachs COVERED 13 short contracts and bought 495 long contracts to bring their long position to 2,525 contracts AND AS A RESULT MAKING THEM NET LONG 28 CONTRACTS!!! The largest net short position they held was 52,000 contracts in March of 2006.

Below it is shown graphically. The declining net short position has been going on for 30 months and I have predicted for some time that GS would eventually be net long just before the gold price explodes. Well here we are! John Reade of UBS poked fun at me for this analysis saying that GATA doesn’t know what an arbitrage position is. Well, Mr. Reade I do know, and this sure as hell isn’t one! This chart documents perfectly the demise of the gold Cartel. It should be noted that in July Goldman Sachs advised its clients to sell gold as they said gold was going to $740/oz. Their price prediction turned out to be accurate, however, they did not sell gold from their own account during that time; they covered their shorts with the aid of charitable donations from the clients’ who followed their advice!



Here is the estimated liquidated value of the GS TOCOM gold position. I no longer have to extrapolate this as their net short position has now been eliminated. GS has lost approximately 185 MM$ on their TOCOM position since I started tracking the data in January 2006. One has to wonder why a company as smart as GS would tolerate being in an increasingly losing position for so long. I think we know the answer. The suppression of the gold price facilitated orders of magnitude larger profits to be made in other markets.



Now that Goldman Sachs has finally come on to the GATA side of the market we can expect a gold price explosion.

For a long time many in our camp wondered if the Cartel was so smart they could continue their manipulation for ever. We have seen in the last few weeks that some of the key players have stepped on their own land mines. The laws of economics can be frustrated but not repealed."
Cheers
Adrian