Managers Buying Gold as Hedge Against Inflation

November 26, 2012 James Heinsman Hedge Fund News

Investors are Going for the Gold

As global debt troubles and the prospect of inflation rear their worrisome heads, some hedge fund managers are hedging their investments by purchasing large quantities of gold through the use of exchange traded funds, or ETFs.

One well-known manager, John Paulson of Paulson & Co. now holds 66 tons of gold purchased through an ETF, valued at $3.66 billion in SPDR Gold Shares, the largest metals ETF with almost $75 billion in assets. The total gold under SPDR’s control comes to 43 million ounces, or about 1,342 metric tons.

According to a Bloomberg News report Paulson’s share in the gold ETF is larger than what several countries have in gold reserves, including Brazil. Gold ETFs have become quite popular this past year, with investors using exchange traded products such as SPDR Gold Shares (NYSEArca:GLD) to buy up 247.5 metric tons of gold. That amount represents more than the US annual gold mine output.

One impetus for the gold buying spree, which have reached record levels this year, is the Federal Reserve’s third round of quantitative easing, QE3.

Gold ETFs make it easy for investors and fund managers to trade and invest in gold because ETFs eliminate the need to spend money on transporting, storing and insuring the precious metal.

"We see gold as a hedge against the follies of politicians,” said Michael Mullaney at Fiduciary Trust. “It’s a good time to garner some protection in portfolios by having some real asset like gold.”

Fiduciary Trust, Gold ETFs, John Paulson, Michael Mullaney, SPDR Gold Shares,

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