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Goldman Flip-Flops on Gold

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Goldman Sachs on Tuesday reversed its high-profile call to short gold, which it made two weeks ago, just before the metal sunk into bear market territory.

The firm's commodities research team said the decline in gold was more rapid than it expected, and it exited the trade with a potential gain of 10.4 percent, below its original target price of $1,450.

Back on April 10, when gold was ranging in the upper-$1,500s per troy ounce, Goldman recommended shorting the metal. At the time, it justified that position on the grounds that gold didn't move up significantly when markets were anxious about the bailout of Cyprus and restructuring of its banks.

(Read More: Should Traders Trust Anything Goldman Says?)

Goldman had forecast that gold would close out 2013 at $1,450 per ounce, and then take a hit in 2014 with a predicted close of $1,270. The analysts also thought perhaps they were a bit on the prescient side with that trade, saying: "While we may be end up too early in entering this trade, we prefer that to being late given our belief that the skew to current prices is to the downside."

Within days of that call, gold fell almost 16 percent to a low of $1,321 an ounce. While the bailout of Cyprus did not send gold higher, reports that Cyprus would sell gold to cover its shortfall sent the metal tumbling, as traders bet other European countries might also sell gold to raise cash.

Gold was trading lower Tuesday, after bouncing Monday to settle at $1,421, or $100 above its low.

"Our bias is to expect further declines in gold prices on the combination of continued (exchange-traded fund) outflows as conviction in holding gold continues to wane as well as our economists' forecast for a re-acceleration in U.S. growth later this year," the analysts wrote. They said the surprisingly rapid decline was probably accelerated by breaks in "well-flagged technical support levels."

Cynics might scoff at the timing and motivation of the call, but few traders can argue with Goldman's trading prowess.

"When you make more than 10 percent in a couple of weeks, that's a pretty good return," said Neal Berger, president of investment advisors Eagle's View Capital Management.

Still, despite Goldman's call, other traders see more tough breaks for bullion.

"Gold still has room on the downside," said Anthony Grisanti, president of GRZ Energy and a CNBC contributor. Grisanti noted an important sentiment shift in the pits, with traders now selling rallies whereas before they used to buy dips.

—By CNBC's Lawrence Lewitinn

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