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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 [US@GC.1
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Take Paulson & Co. - run by Wall Street whale John Paulson. This hedge fund was the largest shareholder of the GLD [GLD
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] 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.
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Trader disclosure: On June 11th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC), (BTU), (MSFT), (NUE); Macke Owns (BAC), (AGU), (USO), (SDS); Finerman Owns (RIG), (TBT); Finerman's Firm Own (NOK), (PBR), (RIG), (TBT); Finerman's Firm Is Short (BAC); Finerman's Firm Owns (BAC) Preferred; Finerman Owns (BAC) Preferred; FInerman's Firm Owns (WFC) Preferred; Finerman Owns (WFC) Preferred; Terranova Owns (TER), (SDS), (XBI), (ABT), (RIMM), (GENZ); Terranova Is Short (RIG), (OIH), (FCX); Terranova Is Short (XOM) Call Spread; Terranova Owns (BRCM) & (BRCM) Calls; Terranova Owns (MS) & (MS) Calls; Terranova Owns (HES) & (HES) Calls; Terranova Owns (DIS) Call Spread; Terranova Owns (X) & (X) Calls; Terranova Owns (JPM) & (JPM) Calls; Terranova Owns (POT) & (POT) Calls; Terranova Owns (IBM) & (IBM) Calls
Data is a real-time snapshot *Data is delayed at least 15 minutes