Many investors are worried about the state of our markets and world economies, but the traditionalists are adhering to the time-honored, old-fashioned stores of value found in gold, along with related exchange traded funds (ETFs).
After governments threw heaps of money at the economic problem, large investors are now hoarding gold in anticipation of weakening currencies, reports Gregory Zuckerman for The Wall Street Journal. Traders have already begun to move in on precious metals, and the trend is expected to continue.
John Paulson’s firm, a firm that did quite well for itself in betting against subprime mortgages, is enlarging its own gold holdings and it will offer a new gold-denominated share class. David Einhorn’s Greenlight also has a major stake in gold within its porfolio, which is allocated in ETF holdings and gold future contracts.
Is it bullish or bearish behavior, though? It turns out it’s a little of both.
The major reasons for buying gold is the growing concern over whether or not countries will default on their debt after spending to help stabilize their economies. Eventually, spending could lead to inflation and bulls are saying deflation helps keep gold as a good store of value. There are those that just see gold as a better investment compared to a fickle stock market, or low-yielding corporate bonds and Treasuries.
- SPDR Gold Shares (GLD): down 2.1% in the last week; down 1.6% in the last month; up 15.5% in the last three months
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.