- Hedge funds are betting on gold in 2020 as an attractive way of getting returns amid unprecedented central bank stimulus during the coronavirus pandemic, the Financial Times reported Tuesday.
- Elliott Management, Caixin Associates and Dymon Asia Capital have greatly profited so far this year from betting big on gold, the newspaper said.
- Elliott Management, which reportedly gained about 2% in the first quarter from profits in gold positions, said in a letter to investors that gold is “one of most undervalued” assets available, the FT said.
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Large numbers of major hedge funds are betting on gold, on expectations that central banks’ unprecedented economic stimulus packages during the coronavirus crisis will prompt devaluations in major currencies, the Financial Times reported Tuesday.
Elliott Management, Caxton Associates and Dymon Asia Capital are among the funds to bet on gold so far in 2020, the FT said. Gold’s price is up 12% year-to-date, according to Markets Insider data.
New-York based Elliott Management, which manages about $40 billion in assets and is run by renowned investor Paul Singer, said in a letter to clients last month that gold was “one of the most undervalued” assets available and its fair value is “multiples of its current price,” the FT reported.
In that letter, Elliott attributed that undervaluation on low interest rates, disruption to mining and a “fanatical debasement of money by all of the world’s central banks” caused by coronavirus, the FT said.
Danny Young, founding partner at Singapore-based Dymon Asia – up 36% aided by its bet on gold prices – said the yellow metal is a “hedge against unfettered fiat currency printing,” the FT reported.
The hedge fund gained about 2% in the first quarter from profits in gold positions, the newspaper added.
In a recent letter, Singer laid out his predictions for a steep drop in stocks due to the effects of the novel coronavirus and also listed out other doomsday scenarios unrelated to the pandemic.
London-based Caxton Associates, established in 1983, has also greatly profited from gold bets, the FT said, gaining through futures it held and other “exchange for physical” contracts, that allow for an exchange of futures for actual gold bars.
Caxton’s global fund is up 15% so far this year, while its macro fund gained nearly 17%, the FT said, citing an investor.
Elliott declined to comment when contacted by Markets Insider, while Dymon Asia did not immediately respond, and Caxton could not be reached.
Many analysts forecast an increase in gold prices in the coming months as a result of the coronavirus pandemic. Bank of America forecast in April that prices could almost double to $3,000 by the end of 2020, while UBS said last week gold could gain 5% more from current levels.
Gold was down 0.5% at $1,692 per ounce as of 10.10 a.m. ET Tuesday.