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Gold-bearish Goldman cuts deal for Ecuador’s massive hoard

466,000 ounces worth $580 million exchanged for “liquidity”

Goldman Sachs might officially be a gold bear, but that’s not stopping it from accepting part of Ecuador’s massive gold hoard.

The Central American nation’s central bank has agreed to transfer more than half of its bullion reserves — or 466,000 ounces worth about $580 million — to Goldman for three years “as the government seeks to bolster liquidity,” Bloomberg reported.

Coming off a $3.2 billion bond default five years ago and scrambling with a $4.94 billion budget deficit, Ecuador will get “instruments of high security and liquidity,” the report said. In other words, it’s selling hard assets for paper ones.

What does Goldman get out of this deal, given that its official forecast calls for gold to fall this year? It had no comment to Bloomberg. However, the banking giant has the notorious reputation of taking the other sides of trades it publically endorses.

That’s according to, among others, former Goldman insider Greg Smith, who alleges that the firm was advising “clients to bet on the opposite outcome of what the firm believed would happen” so it could profit by taking the other side of the trade,” the Financial Times reported in 2012. Financial journalist Matt Taibbi also makes the same argument in his body of work.

Financial analyst and blogger Michael Krieger has an idea what Goldman might have planned. “This gold is headed straight to China or Russia. Good luck every getting that back amigos. Just ask Germany,” he wrote. In other words, this is another example of gold leaving the West and heading East, never to return.

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