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Hedge Funds Remain Bullish on Gold

Release Date: 
Thursday, November 15, 2012

Gold prices were lower as Europe fell into a double dip recession, sending the dollar higher.  Gold was $15.00 lower at 9:29 a.m. Pacific Time on the New York Spot Market, trading at $1,713.60 per ounce.  Spot silver was $.21 lower, trading at $32.73 per ounce.  (Click here for the most current spot prices.)

Third-quarter euro-zone gross domestic product shrank 0.1% compared to the second quarter, While Germany, the largest Eurozone economy, managed to post positive growth, its GDP fell to 0.2 percent in the third quarter. 

Violence in the Middle East sparked concern over oil supplies as Hamas militants fired dozens of rockets into southern Israel and Israel retaliated with air strikes across the Gaza Strip.  Saxo Bank vice president Ole Hansen commented on how the rising tensions may support gold if the situation deteriorates.  "An all-out war would trigger high oil prices leading to higher inflation and subsequently a return to recession," which would support gold, Hansen said.

The hedge fund controlled by billionaire investor George Soros increased its gold holdings in the third quarter by 50 percent, regulatory filings showed.  Billionaire Louis Moore Bacon also increased his gold holdings.

Billionaire hedge fund manager John Paulson continued to hold his significant gold stake in the third quarter after making a $374 million quarterly gain.  A Paulson executive said at an industry conference the firm remained bullish on the yellow metal and analysts took Paulson’s continued investment in gold as a confirmation that the well-known gold bull has not lost his faith in the precious metal as a long hedge against inflation. In the second quarter, Paulson raised his stake in gold for the first time since the first quarter of 2009.

Nic Brown, analyst with Natixis, said that concerns over the approaching U.S. fiscal cliff may lift gold's appeal as a safe haven asset if negotiations are protracted.  "If... agreement looks less likely, I see risks to the upside in the gold price," he said.

In a research note, ANZ analysts commented, "we want to reiterate our end-year target of $1,780.”

(Sources:  “Euro zone double dips back into recession,” Marketwatch, November 15, 2012; “Paulson holds on to gold pile in third quarter,” Reuters, November 15, 2012; “PRECIOUS-Gold slips as weak euro zone data hurts stocks,” Reuters, November 15, 2012; “PRECIOUS METALS: Gold Rangebound in Asia, Looking for Catalysts,” Wall Street Journal, November 15, 2012; “Gold Falls on Concern Demand Slowing Amid Dollar Strength,” Bloomberg, November 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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