Commodities: How to Trade Like Goldman Sachs

It’s no secret that Goldman Sachs (GS) has an enormously profitable trading operation. In the most recent quarter they reported an astounding $10B in total trading and investments. This represented 81% of the firm's total revenues. One of the most profitable arms of this trading operation is the commodity desk. Goldman’s commodity calls are often market moving and always noteworthy. Their latest commodity positions reflect the firm’s continued bullish outlook on the economic recovery.

Goldman is very bullish on Natural Gas. Their 3 month price target on Nat Gas is $6.50 while their 12 month target is $7.70. That is a 33% and 57% expected climb.

How to play it? Goldman likes Summer 2010 NYMEX Natural Gas futures.

In the WTI oil market Goldman has a 3 month target of $85 and a 12 month target of $94. That equals a 9% and 20% rise in oil prices. They see continued demand from China as a primary driver.

How to play it? Goldman likes a long timespread. They like buying the December 09 WTI and selling the 2011 WTI contract.

In the metals markets Goldman is surprisingly bearish on Gold and Silver. Their 3 month and 12 month price target for gold is $960. Their 3 month target for silver is $15.60 and their 12 month target is $16. This is consistent with their benign inflation expectations. They do not recommend any specific short trades on the two metals at this time. They do, however, like 2010 January Platinum.

In terms of agriculture Goldman likes Corn futures. They currently have a $4 3 month price target and a $4.50 12 month price target.

How to play it? Goldman likes the May 2010 Corn futures.

Comments

[GMiki1:]

Is Goldman really bearish on gold and silver or is it manipulating gold and silver prices the best it can because of enormous short positions? And even if Goldman were bearish on the PMs, which I don't believe for a second, would that position be correct with India just buying 200 tons from the IMF?

Nov 03 10:44 AM

[market ace:]

GS bearish on gold and silver - Ha Ha Ha.

Since they are very short on these metals as they carry out their gov't mandate to manipulate their prices they have gotten caught with their pants down on this one and are trying to again lie their way out of a big loss.

In typical fashion I am sure they are betting against their own predictions as that is the way they sucker investors into their web to show great trading profits..

Nov 03 11:15 AM

[Roger Knights:]

Gold won't dip below $1000, because China or some other Asian central bank will buy on dips. The mode of the music has changed.

From here on out there will be increasingly high implicit support zones for gold. The won't be big money made on the short side.

Nov 03 04:49 PM

[untrusting ...:]

Roger,
Would not be so sure about that. From any reports we have seen, the large commercial traders are supposedly short gold and reports claim that the large commercial traders are usually correct on the directional trading. May not happen in the next few days or weeks, but one has to guess that over the months the large commercial traders will prevail. They have access to hugh trading liquidity and one has to guess that it usually does not pay to bet against them.


On Nov 03 04:49 PM Roger Knights wrote:

> Gold won't dip below $1000, because China or some other Asian central
> bank will buy on dips. The mode of the music has changed.
>
> From here on out there will be increasingly high implicit support
> zones for gold. The won't be big money made on the short side.

Nov 04 12:13 AM

[sticktoitiv...:]

And just where are you getting this info? Do you have access to the security camera above the trading desk?

Nov 04 12:52 PM

[ValueInvestor:]

Where does this author come up with these calculations? Does he know how the futures market works? You can't simply buy Nat Gas at todays price of $4.90 and hold it for 12 months.

"Goldman is very bullish on Natural Gas. Their 3 month price target on Nat Gas is $6.50 while their 12 month target is $7.70. That is a 33% and 57% expected climb."

Uhmm, the 3 month price (March 10) is currently at $5.30 meaning an increase to $6.50 is only a 22.6% increase and the 12 month price (Dec 10) is currently at $6.60 meaning an increase to $7.70 is only a 16.6% increase.

Learn how the markets work before posting junk like this.

Nov 04 12:59 PM

[The Economi...:]

Agreed. Where does this information come from?


On Nov 04 12:52 PM sticktoitiveness wrote:

> And just where are you getting this info? Do you have access to the
> security camera above the trading desk?

Nov 04 12:59 PM

[Aalvarma:]

Fed still supporting the quantitative easing and chatting about keep the interest rates on hold for a long time + Norway, Australia, etc. raising interest rates + India and other countries withdrawing monetary stimulus + ECB's officials chatting about withdrawing quantitative easing + global economy showing clear signs of improvement (specially outside the US) + China's gold/reserves ratio about 2% compared with an average of 10% among the central banks globally, and India buying 200 tons + some housing bubbles (Australia) are beginning to inflate again = weak dollar = strong gold

Nov 04 01:26 PM

[Jon G:]

how to trade like golman involves trading against your institutional clients....since we can't see order flow, we are at a big disadvantage

Nov 04 01:43 PM

[Robespierre:]

You can never trade like GS unless you are able to rigged the markets or the regulators. GS just had 1 losing day last Q. Do you actually think that they are that good? They beginning to look more and more like Madoff to me and just like in the Madoff case the SEC will not investigate this outlier "performance". JMHO

Nov 04 03:58 PM

[Jeff Nielson:]

"How to trade like Goldman Sachs?"

It's actually MUCH easier than this author claims. All you do is pick up the phone, call your servants in the Treasury Department, get them to tell you of important policy decisions (BEFORE anyone else in the world has access to this news) - and THEN place your bets.

It must be nice to be able to engage in "legal" (?) insider-trading!

Nov 04 04:04 PM

[user225084-...:]

>>Goldman likes Summer 2010 NYMEX Natural Gas futures.

Translation: Goldman would like YOU to buy 2010 NYMEX Natural Gas futures.

Whether they would like to buy the same product for their own account is a completely different story....

I hope y'all understand that.

Nov 05 12:24 PM