Hedge Funds Buy Gold As Hedge Against Inflation

Date: Friday, September 11, 2009
Author: Best Syndication

As the Euro and the Yen continue to gain in value compared to the dollar, the price of gold remains near the $1,000 mark. The dollar is at its lowest mark since December. October gold futures closed at $995.70 an ounce on the New York Mercantile Exchange (NYMEX) on Thursday. Compare that to $882 on April 21sst of this year.

Since September 1st the value of Gold Fields Limited (GFI) shares have spiked. They were at $11.86 and on Thursday they were selling for $14.19 a share. Last Friday the company announced that it disposed of its holding in Eldorado Gold Corporation (Eldorado). Gold Fields disposed of 27,824,654 Eldorado shares at CAD11,61 per share for a total consideration of CAD323 million (approximately US$293 million*).

A similar trend occurred with AngloGold Ashanti Limited (ADR) which was selling for $36.31 a share on September 1st. Today ADR closed at $42.83 on the New York Stock Exchange (NYSE).

So if the dollar is doing OK, why is gold going higher? The fear of inflation may be driving gold prices.

Reuters is reporting that Billionaire hedge fund manager John Paulson's big stake in AngloGold Ashanti (ANGJ.J). Industry observers say that there is slim chance of a merger / takeover of the company so there is no benefit there.

Gold and gold-related investments make up 46 percent of Paulson’s holdings. The report suggests that Paulson and other hedge funds are stocking up on the precious metal… (as) a hedge against inflation, as governments around the world ramp up spending to combat recession.