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Billionaire Hedge Funds Increase Gold Holdings

Release Date: 
Wednesday, August 15, 2012

Gold moved higher as New York state manufacturing data showed decreased activity and U.S. consumer prices were flat in July. Gold was $3.40 higher at 7:23 a.m. Pacific Time on the New York Spot Market, trading at $1,603.40 per ounce. Spot silver was $.06 higher, trading at $27.99 per ounce.  (Click here for the most current spot prices.)

The Federal Reserve Bank of New York’s gauge of manufacturing showed an unexpected contraction in August for the first time since October 2011, dampening hopes for economic recovery in the U.S.  The Eurozone economy also shrank in the second half, supporting expectations for further economic stimulus.

With consumer prices even for the second consecutive month and showing the smallest yearly increase since November 2010, the Fed may have more leeway for quantitative easing, some analysts suggest. Increased liquidity may fuel inflation expectations in the long run, but the current data show muted price increases that may make it easier for the Fed to act.

“The CPI numbers have removed one roadblock in the path of some announcement on the easing front,” said David Meger, director of metal trading at Vision Financial Markets in Chicago. "(The data is) comforting to those who believe in QE3," VTB Capital analyst Andrey Kryuchenkov said.  He also stated that investors had stepped in to buy gold on a recent dip to the $1,590 per ounce price level.

“People expect prices to rise in the third quarter since historically it has been proved that it’s one of the best periods for gold, and investors who see easing coming in from various central banks are either increasing or holding on to their positions,” said Donald Selkin, chief market strategist at National Securities Corp., which manages $3 billion in assets.

“It’s all about easing, and people are especially waiting for the Fed since investors expect prices will rise,” if the central bank announces more bond purchases, said Walter “Bucky” Hellwig, who helps manage $17 billion of assets at BB&T Wealth Management. “People are willing to hold on to gold to see what the Fed will say.”

Billionaire investors and hedge fund managers George Soros and John Paulson increased their gold holdings substantially during the second quarter. Soros more than doubled his $25 billion fund’s gold investment while Paulson increased the gold holdings in his $21 billion fund by 26 percent. 

(Sources:  “PRECIOUS-Gold climbs above $1,600/oz after US data,” Reuters, August 15, 2012; “PRECIOUS-Gold edges up on Europe stimulus hopes; US data weighs,” Reuters, August 15, 2012; “Paulson, Soros Add Gold As Price Declines Most Since 2008,” Bloomberg, August 15, 2012; “Gold Rises As Consumer-Price Outlook Boosts Bets On Fed Stimulus,” Bloomberg, August 15, 2012) 

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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