1st American Reserve Blog

Every quarter, hedge fund managers are required to file their holdings – including gold holdings – with the Securities & Exchange Commission (SEC) at the midway point of the next quarter. The latest filing was due last Friday, May 15. According to Bloomberg reports on Monday, May 18, there is indication that hedge fund luminaries including Paul Singer, David Einhorn and Crispin Odey are among those bullish on gold, according to recent letters to investors. So are large asset managers like Blackrock Inc. and Newton Investment Management. Bloomberg reported on their filings and letters to investors: Crispen Odey of the Odey European Fund wrote of his holdings at the end of March: “Gold is the only escape from global monetizing.” Gold futures were the third largest position held by his fund at the time. Paul Singer of Elliott Management Corp told his investors, “In recent months, gold has gone up in price to some degree, but we think that it is one of the most undervalued investable assets existing today.” He argued that low interest rates, mine disruptions and “fanatical debasement of money by all of the world’s central banks” would lead gold to rise to “literally multiples of its current price.” (Literally, one multiple of $1,750 gold would be a doubling to $3,500. Two multiples would be to $5,250, and so forth…) Turning to the expected inflation next year, David Einhorn’s Greenlight Capital argued in a letter to the fund’s investors that, “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,” Catherine Doyle at Newton Investment Management agreed: “It’s almost inevitable that there will be a fiscal tailwind for gold – when markets wake up to the scale of the stimulus.” Even if hyper-inflation isn’t coming, Russ Koesterich, portfolio manager of the $20.5 billion BlackRock Global Allocation Fund, points to gold’s inverse relationship with real interest rates: When interest rates are low, adjusted for inflation, the opportunity cost of holding gold is low and real rates are negative now. In February, Bank of America (BofA) Securities came out with a new “Global Investment Strategy” report for the 2020s with recommendations that investors adjust portfolios by going into a strategic posture with 25% in gold. Monday, May 4, Wells Fargo Bank issued a report on Real Assets, in which John LaForge, Wells Fargo’s Head of Real Asset Strategy opened with this headline: “Gold may test its all-time highs, adding, “Gold has a host of economic and market factors working in its favor, and we are increasingly confident that gold could test its all-time high of $1,900 this year.” Wells Fargo has already upgraded its year-end 2020 gold target price three times this year and now sees this new all-time high above $1,900. Whenever gold prices are rising, as they are now, and established banks and hedge funds predict higher gold prices, many coin and bullion dealers place more ads, and those ads often bring in more new customers than usual. Say an ad brings in 100 new calls in normal times. Those ads might bring 150 new callers in hot markets like this. A larger percentage of those callers will buy bullion coins. Within 6-24 months, a good percentage (say 10% to 20%) will graduate into rare coins, often pushing up the prices of select rare coins. I urge you to buy select rare coins now before prices rise further!