Hedge Fund Managers like Paul Singer Are Confident about Gold


May. 20 2016, Published 11:23 a.m. ET

Singer on gold

Billionaire hedge fund manager Paul Singer from Elliott Management oversees about $28 billion. Elliott Management’s primary fund, Elliott Associates, was up about 2.7% in the first quarter of 2016. In his letter to his clients last month, Singer wrote, “It makes a great deal of sense to own gold.” He continued, “Investors have increasingly started processing the fact that the world’s central bankers are completely focused on debasing their currencies.”

Elsewhere in the letter, he also suggested that gold’s phenomenal first quarter, which proved to be the best quarter in about 30 years, may just be the beginning of gold’s rally. Further, the loss of confidence in central bankers’ ability to jump start growth could take the metal even higher.

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Confidence in central banks

The financial doldrums and monetary policy decisions from central banks around the world are having a big effect on gold. With a whopping 20% gain since the start of 2016, gold may further rise with the turbulence in the financial markets.

The major players in the world like the US, Japan, and Europe are keeping interest rates in check, which impacts gold. Where Japan and Europe are pumping money into their economy by the way of quantitative easing, the US is trying to tighten its belts. Singer also mentioned in his letter that if investors’ confidence in the central bankers’ judgment continues to weaken, the effect on gold could be powerful.

As the above chart shows, the fluctuations in gold price, depicted by the SPDR Gold Trust (GLD), also brings about extensive changes in the mining-based funds like Sprott Gold Miners (SGDM). These two funds have seen a rise of 20% and 80%, respectively, year-to-date.


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