Browsing all articles tagged with hedge
Apr
29

Precious Gold Rises 1 percent, Holds near One Week High

Yellow metal rose more than 1 percent on Monday and held near its highest level in more than a week as a bounce back in prices from multi-year lows failed to control investor appetite for the gold’s, leading to a shortage in physical supply.

Current bleak US growth statistics that raised expectations the Federal Reserve will keep its current pace of bond buying at $85 billion a month also supported precious metal that is typically seen as a hedge against inflation.

However investors are still roiled by the very recent event of the tumble. The question is how supportable is this physical buying as at the same time, we are still seeing funds flowing out of yellow metal. Retail investors won’t be buying bullion in hundreds of millions of dollars like the funds.

Both cash gold and futures dropped to around $1,321 on April 16, their weakest in over two years, subsequently drop below $1,500 sparked a sell-off that encouraged investors to slash their holdings on exchange traded funds. They touched an 11 day high above $1,484 on Friday.

I don’t consider gold is out of the woods yet, however there’s room for upward correction. One of the reasons why precious metal has plunged so much was the strong signs of US economic recovery.

US gold futures which often give trading cues to cash metal, hit a high of $1,472.20 per ounce. By 0226 GMT, prices stood at $1,469.60 climbed $16.00. Spot gold gain $7.51 per ounce to $1,470.01.

Premiums for gold bars have jumped to multi-year highs in Asia as of strong demand from the physical market, which has led to a shortage in gold coins, bars, nuggets and other products.

In other markets, shares in Asia crept ahead on Monday however the US dollar lost ground to the yen as markets braced for a busy week for economic statistics and central bank policy meetings in the United States and euro zone.

Holdings on the biggest gold-backed exchange-traded-fund ETF, New York’s SPDR Gold Trust continue to drop, which was a sign investors have yet to reinstate their confidence in gold. The holdings are currently at their lowest since September 2009.

The current string of underwhelming statistics will strengthen the hand of the doves at the Fed and temper any talk of tapering back the bond buying programme. The policy setting Federal Open Market Committee will announce its decision at 1815 GMT on Wednesday.

Report by the Commodity Futures Trading Commission showed on Friday that yellow metal rallied to an 11-month high in October previous year after the Fed announced its third round of aggressive economic stimulus, raising fears the central bank’s money printing to buy assets would stoke inflation, money managers and Hedge funds trimmed their net longs in gold futures and options in the week to April 23 as investors reduced optimistic bets.

 

Apr
20

Paulson’s Advantage Fund Hurt by Fall in Gold

Hedge fund billionaire John Paulson’s best-known fund losing 2.4 percent in April, mostly due to the sharp sell-off in precious metal. The Paulson & Co Advantage fund is making money for the year however just barely with a 1.3 percent addition.

Gold is one of the worst performing assets this year following rising mightily following the financial crisis. The precious metal has dropped 17 percent this year including a 13 percent fall in April alone.

The fund’s significant holdings in numerous gold mining stocks, including a bet on AngloGold Ashanti Ltd, which is losing 40 percent this year, have considerably cut into the Advantage fund’s returns.

The sharp fall appears to have caught a number of hedge fund managers like Paulson by surprise. Coming week he intends to update his clients regarding all of his funds, including a fund dedicated specially to investing in gold.

Shares of companies tied to the performance of yellow metal, including the SPDR Gold Trust the largest gold exchange traded fund also have plunged sharply. Financial information firm Markit said this year investors have pulled $10 billion out of the precious metal ETF as of Wednesday.

The fund manager, lionized following a big bet against the overheated housing market in 2007 that made golds for his investors, has floundered trying to replicate the success in recent years.

Paulson, who has made money on bullion up until this year, has long held firm to the view that inflation will ultimately rebound, making yellow metal a prudent hedge. However in the wake of the selloff the firm has sustained losses in the hundreds of millions of US dollars in several funds that invest in yellow metal.

Assets at his firm have slumped to $18 billion down from $38 billion in early 2011 due to redemptions and poor performance. Over the past two years the Advantage fund and a leveraged version of the fund have posted some of the most horrible numbers in the $2.2 trillion hedge fund industry.

At the end of the first quarter, the Advantage policy, which includes the two funds and managed accounts had almost $4.6 billion in assets.

Apr
19

Gold jumps More Than 2 Percent, Still down for the Week

Yellow metal rallied more than 2 percent on Friday as its bounce back to  $1,400 per ounce spurred technical buying, however bullion was still heading for a fourth week of losses following a brutal sell-off shattered investors confidence.

Precious metal has been caught in a tug of war among physical buyers seeking bargains and wary investors cutting exposure to the gold on nagging worries about central bank sales and forecast of easing inflation.

Gold strike a session low about $1,385 before gaining strength to $1,414.30 by 0715 GMT, up $23.55. Dealers also noted physical buying, even though prices had added more than $100 since striking a 2-year trough earlier this week.

Physical dealer in Singapore, Prices have suddenly jumped however I guess it’s as gold has broken the $1,400-level again. Technically, people are just buying up again.

Physical buying from Thailand is not that strong. We are considering demand from Indonesia and local buyers and also modest from India.

Bullion investors are waiting for the 1930 GMT release of US CFTC statistics showing the newest trading by hedge fund and money managers for more cues.

The plunge in prices ignited a spate of buying in gold coins, bars and nuggets, sending premiums for precious metal bars to multi month highs in Asia. Buying also enhanced in top consumer India following a lackluster start.

This gives us some confidence that as panic selling passes, prices can rebound by $100 to $150 an ounce and trade in the $1,400 to $1,550 range over the next 3 to 6 months.

US gold futures for June delivery also staged a humble rally, standing at $1,414.30 per ounce climbed $21.80.

Selling on COMEX, blamed on the outflows on gold backed ETFs was accountable for a rout in the cash market. Spot gold recorded its largest ever daily drop in dollar terms on Monday, catching gold bulls, veteran and speculators investors by surprise.

Holdings of the SPDR Gold Trust, the world’s biggest gold backed ETF, are at their weakest in three years and there was also assumption hedge fund manager John Paulson a prominent gold bull might have liquidated his enormous gold stake.

Apr
18

Precious Metal Slump Tipped to Fuel China’s Acquisition Follow

The fall down in gold prices is set to rekindle bullion mining takeovers as Chinese companies, private equity funds and sovereign wealth and hedge funds step in to rescue cash strapped small and mid sized miners.

A seven-fold climbed in yellow metal prices between 2001 and 2011 spurred a run of yellow metal mergers and acquisitions. Activity knock down last year as major miners digested some big buys and smaller players held out for better offers, with global gold M&A dipping to $14.6 billion from $43.3 billion in 2011.

Precious metal miners in China, the world’s largest producer, have been chasing mines and listed companies in a bid to develop and match the biggest global producers, like Barrick Gold Corp .

John McGloin, executive chairman of Africa-focused miner Amara Mining that this might be the final shoe to fall that makes some people think there’s no way they are able to finance myself going forward, so they got to consider more seriously regarding my investors and give their investors a return by putting things together with people that have got the cash.

However that is expected to pick up again this year as a 15 percent plunge in precious metal prices this month forces smaller miners, particularly those with high-cost production or single assets, to seek partners to stave off a cash crunch.

With major yellow metal miners like Newcrest Mining and Barrick Gold under pressure to rein in capital spending, slash costs and fix mine problems they are more probable to be spinning off assets rather than chasing acquisitions.

An adviser familiar with the sector, with things so badly beaten up, it is an opportunity for Chinese companies who will only have one or two other bidders for any asset.

That leaves the door open to the Chinese as well as cashed up sovereign wealth funds and hedge funds and private equity, to fill the gap.

Mike Elliott, global metals and mining leader at Ernst & Young said if $1,300 gold stays in place into the second half of this year, then you’ll found to see sellers resetting their price prospect.

Gold future for June delivery knock down $6.4 or 0.5%, to $1,375.80 per ounce during the Asian trading hours. They finished Wednesday down $4.70 or 0.3%, at $1,382.70 per ounce on the Comex division of the New York Mercantile Exchange.