Bringing you live news and features since 2013
Bringing you news, views and analysis since 2013

2351

Comment: The Midas touch

RELATED TOPICS​

In an implicit challenge to the strategy of monetary expansion being deployed by central banks, some hedge funds are now buying gold.

In an implicit challenge to the strategy of monetary expansion being deployed by central banks, some hedge funds are now buying gold. The gold bulls are reported to include David Einhorn, founder of hedge fund manager Greenlight Capital, as well as Eton Park and TPG-Axon.

The view is apparently shared by many institutional and state investors. Zhang Guobao, head of China’s National Energy Administration, has said the country should use part of its nearly USD2trn in foreign exchange reserves to buy more gold and other strategic commodities.

Funds are turning to gold because they are concerned that the response of the US Federal Reserve and other central banks to the economic crisis will eventually result in a significant upsurge in inflation.

‘The size of the Fed’s balance sheet is exploding and the currency is being debased,’ Einhorn is quoted by the Financial Times as writing to investors. ‘Our guess is that if the chairman of the Fed is determined to debase the currency, he will succeed. Our instinct is that gold will do well either way: deflation will lead to further steps to debase the currency, while inflation speaks for itself.’

The central banks and political authorities appear to be gambling that the danger of inflation is currently secondary to the risk of deflation as asset prices slump and bank lending remains stubbornly low. Do the hedge fund managers and institutional investors that are betting on gold as a hedge against inflation have the Midas touch? Time will tell.

Latest News

RQI Investors, an Australian-based active quantitative equities manager and part of the First Sentier Investors..
UK-based wealth management companies London & Capital and Waverton have announced that they have reached..
Figment Europe, a provider of institutional staking infrastructure, writes that it is solidifying its presence..

Related Articles

British pound coin
Fixed income’s return to favour following widespread interest rate rises has led to investors overcrowding sterling investment grade credit, delegates at the Pensions and Lifetime Savings Association investment conference have heard...
Fixed income’s return to favour following widespread interest rate rises has led to investors overcrowding sterling investment grade credit, delegates..
Sustainable Economy Top Panel
Europe is driving the growth in sustainable investment with global assets under management in ESG-labelled funds passing USD2.8 trillion...
Europe is driving the growth in sustainable investment with global assets under management in ESG-labelled funds passing USD2.8 trillion...
Pension funds
UK institutional investors are questioning the value of investing in private markets despite pressure from government to finance the country’s net zero and levelling up ambitions...
UK institutional investors are questioning the value of investing in private markets despite pressure from government to finance the country’s..
Juan Nozal, Mapfre Asset Management
Juan Nozal, Fixed Income Portfolio Manager at MAPFRE Asset Management, talks about the outlook for fixed income assets over 2024, in what he predicts will be an outstanding year for this asset class...
Juan Nozal, Fixed Income Portfolio Manager at MAPFRE Asset Management, talks about the outlook for fixed income assets over 2024,..
Subscribe to the Institutional Asset Manager newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by