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The biggest money managers are flocking to gold as inflation fears intensify

Published Thu, Apr 18 20241:53 PM EDT

Hedge funds and other money managers have been stepping up wagers on gold as the bullion reached a series of new highs on the back of reaccelerating inflation. Overweighting precious metals has become the consensus among the largest money managers, with 83% of them being long the asset class, a new Citi analysis of top investors overseeing more than $18 trillion showed. The study also found that gold is the only commodity that big allocators added to over the past month. Gold futures settled at a record high above $2,400 an ounce this week. The precious metal is coming off its third straight week of gains. Investors have been bidding up the precious metal as geopolitical risks rose and inflation reaccelerated. Gold is often used as an inflation hedge because of its limited supply. "The rally has been fueled by a powerful cocktail of safe-haven and hedge fund purchases, prompted by record-high equities and sticky inflation," James Steel, chief precious metals analyst at HSBC Securities, said in a note. "This, in turn, is triggering heavy momentum buying." @GC.1 YTD mountain Gold Professional speculators' net-long positions in gold futures and options hovered near the highest level since 2020 as of April 9, according to the Commodity Futures Trading Commission's latest data. David Neuhauser, founder of Northbrook, Illinois-based hedge fund Livermore Partners, told CNBC that he has increased his weighting in gold to over 20% recently, and that includes gold miner stocks and the yellow metal itself. "With inflation well above trend and being extremely sticky, it doesn't take a rocket scientist to figure out that gold could serve in a great capacity," Neuhauser said in a phone interview. "We are in for a structural change in terms of inflation, and gold will be the metal to continue to find investors worried about monetary disorder, worried about monetary debasement." Neuhauser said he sees the bullion reaching $3,000 over the next few years. Notably, Greenlight Capital's David Einhorn has made gold "a very large position" as a defense play against a potential market downturn. "There's a problem with the overall monetary and fiscal policies of the country, and if both policies are systemically too loose, I think the deficits are ultimately a real problem. And I think that this is a way to hedge the risk of something not-so-good happening," Einhorn said in early April. The hedge fund star revealed that not only did he own the popular SPDR Gold Trust fund (GLD), but he also bought physical bars. Deutsche Bank on Tuesday hiked its gold price forecast to $2,400 an ounce by the year end and $2,600 by the end of 2025. The updated projection is based on the recent investment inflow that has a durable impact on prices, the bank said.