Goldman Sachs’s head of commodities research Jeffrey Currie was quoted yesterday in London as saying:
“Once we get past this stalemate in Washington, precious metals are a slam dunk sell at that point…..You have to argue that with significant recovery in the U.S., tapering of QE should put downward pressure on gold prices.”
This all makes sense of course, perhaps too much sense. There is no doubt that the knee-jerk response to a debt ceiling deal will be to sell gold. However, if everyone is already thinking the same thing and bracing to sell on the news of a deal then how much downside can there really be?
Moreover, there is still a ton of complacency in the market as market participants continue to assume that Washington can’t possibly be incompetent enough to NOT get a deal done in time. Should October 17th roll around without a deal getting done, the sheer panic and force of short covering could easily send gold over $1400 in less than an hour.
Goldman Sachs is making the obvious and easy bearish call on gold. The much less obvious move is to hold a bullish view of gold as a hedge to Washington incompetence and a US economy that is not nearly as strong as the Wall Street sell-side analysts would like to have us believe.
Meanwhile, the technical picture is very clear for gold – it has been slowly maneuvering out of a downtrend and a decisive push above $1330 would go a long way toward turning the tide into the beginning of a new uptrend: 
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