Hedge Funds Boost Gold Investments Amid Inflation Surge

In response to the resurgence of inflation, hedge funds and other money managers have increased their investments in gold, since the price of this precious metal has reached a sequence of unprecedented levels.

Recent research from Citi found that 83% of the largest money managers had begun to underweight precious metals in their portfolios. Notable investors are behaving in this way; their combined assets exceed $18 trillion. Results showed that large allocators added to gold more than any other commodity in the last month.

The price of gold futures has just soared to an all-time high of more than $2,400/oz. The precious metal has now grown profitably for three weeks running. Investors have bought gold at a premium due to concerns about increasing inflation and global tensions. Gold is often used to control inflation due to its scarcity.

James Steel, the chief precious metals analyst at HSBC Securities, stated in a note that a combination of safe-haven and hedge fund investments, driven by historically high stock prices and persistent inflation, have been responsible for the surge. “This is subsequently causing significant momentum buying.”

As of April 9, the Commodity Futures Trading Commission's latest data indicates that professional speculators' net-long holdings in gold futures and options were at a level close to the highest since 2020.

According to David Neuhauser, the founder of Livermore Partners, a hedge fund located in Northbrook, Illinois, he has lately raised his allocation to gold to more than 20%. This includes both the equities of gold miners and the actual gold itself.

According to Neuhauser, in a telephone interview, given the significant inflation rate that exceeds the trend and the high level of inflationary pressure, it is evident that gold might potentially play a crucial role. It is anticipated that there will be a significant shift in inflation patterns, with gold emerging as a commodity that will continue to attract investor concern due to apprehensions of monetary instability and debasement.

Neuhauser predicts that the bullion will ultimately reach a value of $3,000 during the next few years.

David Einhorn from Greenlight Capital has strategically allocated a significant amount of gold as a defensive measure against a possible decline in the market.

It is a major worry that the nation's overall fiscal and monetary policies are flawed, as excessively lax policies might lead to the creation of deficits. “I believe that this approach serves as a means to mitigate the potential negative outcomes,” Einhorn said at the beginning of April.

Aside from owning the renowned SPDR Gold Trust fund (GLD), the heroic hedge fund manager also obtained physical bars.

A recent Deutsche Bank analysis projects that by the end of this year, the price of an ounce of gold will have increased to $2,400, and by the end of 2025, it is anticipated to have reached $2,600. The bank asserts that the present era of increased investments has had a lasting influence on pricing, which is the basis for the heightened prediction.