It seems the battle between inflation vs deflation could be claiming a new casualty.
As you probably know, Fed Chairman Ben Bernanke has focused on deflation – most notably dropping the Fed funds rate to nearly nothing. In fact, it was only last month when Bernanke told an Atlanta Fed conference, “we are currently being very aggressive because we are trying to avoid deflation.”
However, it seems all his efforts to prevent deflation may be sparking a different problem; inflation – big inflation. And hedge funds are gaming it by gobbling up gold .
Take Paulson & Co. - run by Wall Street whale John Paulson. This hedge fund was the largest shareholder of the GLD in May. In fact, more than 28% of the SPDR Gold Trust ETF's outstanding stock was owned by hedge funds, according to Factset Research Systems.
So what's the causuaty? It could be you if you're long gold. The Fast Money traders are concerned that the gold trade is extremely crowded and about to implode.
It’s a critical time in the price of gold and I think we’re at the precipice of something big, says Guy Adami. Personally, I think the move is lower, much lower. It scares me on the down side.
A lot of people have piled into the trade; it’s very crowded, echoes Joe Terranova.