Who Else Has Been Buying Gold?

The question is are you the last one now to be buying gold? The list of successful hedge fund managers who have been buying gold has been growing. It is not just hedge funds…how about China?

What I find interesting is the fact that the hedge fund managers who successfully called the housing crisis are now buying gold. It is not just they are simply buying, they are buying in a big way. John Paulson who made a fortune in the subprime crisis is now betting heavily on gold. He has invested almost 50% of his fund in gold. He is not alone.

David Einhorn has been buying gold heavily as well. Besides hedge fund managers and China, virtually every trend-following commodity trading advisor has been buying gold since its recent break out. The difference with the commodity trading advisors is they are not looking at any fundamental reasons, they are buying simply because the price has been going up. The fundamentalists claim that regardless of inflation or deflation they believe gold will continue its upward thrust.

Inflation is clear with all the money being printed. The deflation stance is interesting as the fundamentalists feel that the US dollar will devalue and with this Gold will go up in value. Their thoughts are aligned to almost a debt deflation stance causing inflation. This is comparable to what happened to the Asian tigers in 1998.

Regardless if one is fundamental or a trend following commodity trader, gold has been moving upward in price. It might be worth considering having some gold coins in your pocket.

Comments

[doubleguns:]

The hedge funds and Einhorn are late to the game and are trying to catch up. Where were they 8 years ago. I appreciate them finally getting to the game but remember.......

They are tail end charlies. They have missed 100's of % in this ongoing move. A push to $2000 will only get them a double.

Sep 14 08:43 AM

[Kristjan Ve...:]

doubleguns,
They are not late to the game. Think about opportunity cost for a minute. They probably figured they could make more money investing the money somewhere else and as John Paulson proved, it was a risk worth taking.

What I find interesting gold is that everybody is talking about it but there aren't a lot of people who actually own physical gold, or paper gold for that matter. This means we are not at the top, not by a long shot. The interest rate policy of the Fed adds even more fuel to the fire. Most of all, I trust the opinion of professionals and this is what they've been saying:
Bill Gross: "Global policy rates will remain low for extended periods of time. " (here:www.pimco.com/LeftNav/... )
Hatzius sees “no rate hikes … through the end of 2010″ (here: seekingalpha.com/artic...)

Sep 14 09:06 AM

[chap08:]

"The deflation stance is interesting as the fundamentalists feel that the US dollar will devalue and with this Gold will go up in value".

I have never seen a good explanation of why gold should do well in deflation (under a fiat system, not a gold standard). I will add your explanation to the list.

If I thought that we would see anything but mild and temporary deflation, I would not hold gold. Under deflation, the dollar would increase in value, not decrease, and I would want to hold dollars. As it is though, I see medium term inflation as more likely, so I prefer gold to cash or treasuries.

Sep 14 09:20 AM

[Mad Hedge F...:]

uuub Those transfixed by gold blasting through the $1,000 level have been missing the real action in silver. The white metal has soared 57% to $17 since the beginning of the year compared to only a 22% move for the barbaric relic, an outperformance of almost three to one. I have been a raging bull on silver all year, and on May 7, grabbed you by the lapels and shook you senseless if you didn’t buy (click here for earlier report ). It is nothing less than owning gold with a turbocharger. Silver gives you a nice double play. Its qualities as a precious metal are giving it a major boost from the flight from the dollar, one of this year’s certainties. It is also an industrial commodity, which unlike gold, is consumed, and therefore gives you a call on the recovering economy. If you don’t think this move is real, check out the shares of the silver producers. Coeur D Alene Mines (CDE) has rocketed by 57% this month, while Silver Wheaton (SLW), and Hecla Mining (HL) have also done well. If you want to get set up on buying silver futures, e-mail me at madhedgefundtrader@yah... and I’ll tell you how to do it. To accumulate .999 fine silver dollars for only a buck over spot, or bullion at the lowest spreads in the market, visit mileniummetals.net by clicking here. How long will it take to get to the old high of $50? The Hunt brothers must be grinding their teeth.

Sep 14 09:53 AM

[Roger Knights:]

It doesn't make sense fundamentally for gold to rise so strongly, since inflation's way down the road. (This must be (?) why there have been so many new shorts lately.) But gold has pushed upward on huge volume.

Therefore (?) "something's up."

Sep 14 10:34 AM

[GMiki1:]

I hate when commenters post the same thing in many places--these are basically ads--Oman, for example.

I've held physical gold since under $300 and have lots of silver, including physical and the wonderful SLW. It's not gold versus silver, it's both. Probably, yes, for hedge funds, it's the price of opportunity, but I'm not a day trader.

Sep 14 11:56 AM

[chap08:]

Roger, gold is not rising "so strongly" in anything but the dollar. Surely that gives you enough of a clue "what's up".


On Sep 14 10:34 AM Roger Knights wrote:

> It doesn't make sense fundamentally for gold to rise so strongly,
> since inflation's way down the road. (This must be (?) why there
> have been so many new shorts lately.) But gold has pushed upward
> on huge volume.
>
> Therefore (?) "something's up."

Sep 14 12:19 PM

[AndrewBaker:]

Suddenly gold is getting more than its fair share of attention, yet it has always been a store of value when uncertainty abounds everywhere else. On-one should be surprised that gold is basing at $1000 an ounce: we've had the run-up in the price of just about everything over the summer, yet none has any certainty about it. Now the holidays are over, people are thinking more and realizing that these high prices can't sustain and are not reasonable.

So ... gold is the failsafe: it can't be so easily manipulated over time as fiat currencies, stocks, bonds and commodities can. Take heed: the popularity of gold signals problems elsewhere. Whatever else one does, putting a chunk of one's assets into gold cannot be a bad move.

Sep 14 02:13 PM

[nmelendez:]

Gold is about to hit a top. China's buying gold from their own companies. Look up China Gold. Therefore do not think china is buying from the outside. The people, yes but it's limited. Gold is in the process of a major correction.

Sep 14 07:21 PM

[Andy Abraham:]

You are 100% right. The move started years ago... it all depends on your timing..I honestly do not know any trend followers who have been long since the early 2000 periods...but when there is a price breakout... trend followers take their shots...all the best
Andy


On Sep 14 08:43 AM doubleguns wrote:

> The hedge funds and Einhorn are late to the game and are trying to
> catch up. Where were they 8 years ago. I appreciate them finally
> getting to the game but remember.......
>
> They are tail end charlies. They have missed 100's of % in this ongoing
> move. A push to $2000 will only get them a double.

Sep 15 05:41 AM

[FitBusiness...:]

Funny how all the gold recommendations come AFTER the hedgies have already made their move.

Anticipate the future, not the present.

Be weary of taking advice that everyone seems to be giving.

It usually means there is something else about to happen or soon to happen.

Sep 15 04:27 PM