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If you want a lesson on how to manipulate gold prices, you need only look at what Goldman Sachs Group Inc. (NYSE: GS) has been doing over the past few months.
Goldman set the table by predicting a turn in gold prices back in December 2012, which no doubt contributed to the precious metal's 5% decline in the first two months of the year.
At the end of February, Goldman issued a research report that said the big Wall Street bank had soured on the yellow metal, and dropped its three-month target for gold prices from $1,825 an ounce to $1,615, its six-month forecast from $1,805 to $1,600, and its one-year outlook from $1,800 to $1,550.
Then, just yesterday (Wednesday), Goldman doubled down on its negative outlook for gold prices.
The bank's new targets for gold prices are $1,530 in three months, $1,490 in six months and $1,390 in one year.
The double whammy - two downgrades in two months - had its intended effect, as gold prices fell 2%, to $1,558.80, after Goldman released its report. It was the biggest single-day percentage drop for gold in nearly six months.
"If you've ever suspected gold prices are being manipulated, you're not alone - and you're right, they are," said Money Morning Chief Investment Strategist Keith Fitz-Gerald.
The proof is right in front of us.
In addition to the lower targets, Goldman's reports spell out why the bank thinks gold prices will decline, which are at least as important in the price manipulation strategy as the targets themselves.
Here's what Goldman said in its February report:
"The decline in prices since last fall and our updated forecast [emphasis ours] suggests that the turn in the gold price cycle is likely already underway. As a result, although our U.S. economic forecasts point to modest near-term upside to gold prices, we believe that a sharp recovery in prices to our previous price forecast is unlikely."
Goldman brazenly cites its own forecast as part of the evidence that the downward move in gold prices is happening. In other words, they're practically bragging about their manipulation of gold prices.
Then Goldman applies a Jedi mind-control technique to remedy the inherent contradiction in its forecasts for the U.S. economy and its targets for gold prices: "These are not the forecasts you are looking for."
Yesterday's report again advised investors to ignore economic realities and trust in Goldman instead.
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