Hedge Funds Flock to Gold

As the Federal Reserve continues to provide generous support to the coronavirus-battered economy, leading hedge fund managers are piling into gold, anticipating a devaluation of the U.S. dollar, and a possible rise in inflation.

Protect yourself from a devalued U.S. dollar.

Invest in gold today.

Gold is “one of the most undervalued investible assets existing today,” wrote Paul Singer, Founder and President of Elliott Management, in a recent letter to his investors. He predicts gold will jump to “literally multiples of its current price,” in part as a result of “fanatical debasement of money by all of the world’s central banks,” according to Bloomberg News.

Well-respected hedge fund executives David Einhorn and Crispin Odey are also pointing to aggressive central bank money printing as a factor that increases the attractiveness of gold. As government banks flood their economies with cash, fiat currencies will lose value, they maintain.

“Gold is the only escape from global monetizing,” wrote Odey, founder of London-based Odey Asset Management. “In the short term, the money will be made on the inflation bet,” Odey told holders of his Odey European Inc. fund.

The U.S. Federal Reserve, in particular, has been especially aggressive in attempting to minimize the damage of the coronavirus shutdown by injecting trillions of dollars into the economy through loans, purchases of government securities, and promises to buy municipal and corporate bonds to prevent defaults that could ripple through the economy. The Fed has been even more aggressive in responding to the coronavirus than to the financial crisis of 2007–2008, when gold began an explosive move to $1,900 an ounce in 2011.

Once the economy recovers, some of the hedge funds believe the easy monetary policy could reignite inflation—a positive for gold.

“We expect policymakers to target and applaud mid-single digit inflation, which, combined with interest rate suppression, will be the only way to outgrow the mounting debts,” wrote David Einhorn, leader of Greenlight Capital.

Protect yourself from a devalued U.S. dollar.

Invest in gold today.