Hedge Funds Goldman Sachs Gold

Hedge Funds Goldman Sachs Gold

Hedge Funds Unlikely to Sell Gold Over Goldman Case

The high-profile SEC lawsuit against Goldman Sachs will likely have broad consequences in the financial industry but it seems that the sale of gold by hedge funds is not one of them.  The investment banking firm was accused of fraud tied to collateralized debt obligations after it failed to disclose to investors that Paulson & Co was influencing the selections in the portfolio--Paulson was not charged in the case.

At the end of 2009, Paulson was the biggest stakeholder in the SPDR Gold Trust--the largest exchange-traded fund backed by gold--while Goldman Sachs was the eleventh.  For now, it seems that hedge funds are not going to sell gold positions as a result of the Goldman Sachs case and even if they do central banks will likely step in to up their gold holdings at a lower price. 
Hedge-fund managers and other large speculators increased their net-long positions in New York gold futures in the week ended April 13, according to U.S. Commodity Futures Trading Commission data.
Speculative long positions, or bets prices will rise, outnumbered short positions by 220,742 contracts on the Comex division of the New York Mercantile Exchange, the Washington- based commission said in its Commitments of Traders report. Net- long positions rose by 17,296 contracts, or 9 percent, from a week earlier.
“In the short term, there’s a possibility of a pullback and we would recommend to any investor that’s a good opportunity” to enter the market, Smith said. “In the long run, the hard assets will have sustainable value and sustainable purchasing power.”
Gold rallied 24 percent last year as central banks and governments maintained low interest rates and spent trillions of dollars to stimulate economies, sending the dollar 4.2 percent lower against six major currencies. Bullion has gained 3.6 percent this year.  Source

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