Gold bulls cut positions on signs U.S. growth quickens

Billionaire Paulson

This year’s declines hurt profits at funds run by billionaire John Paulson and for mining companies including Barrick Gold Corp. that have announced at least $21 billion in writedowns in the past two months. U.S. expansion will accelerate in the current quarter and at least the following four quarters, according to the median of as many as 101 economist estimates compiled by Bloomberg.

Greenlight Capital Re Ltd., the reinsurer headed by hedge- fund manager David Einhorn, sold “a small amount” of bullion to buy shares of gold-mining stocks that were in “free fall,” Einhorn said on a conference call July 30. Their view on the metal hasn’t changed, he said. The Philadelphia Stock Exchange Gold & Silver Index of 30 mining companies plunged 34% in the three months ended June 30, compared with a 23% drop for gold futures.

Labor Market

The Fed’s Open Market Committee, which sets the course of policy, cited the risk of low inflation in pledging to keep buying bonds every month after a two-day meeting concluded July 31. St. Louis Fed President James Bullard said Aug. 2 that the central bank should wait for evidence the labor market and economy are strengthening before tapering purchases.

U.S. payrolls increased by 162,000 in July, the least in four months, and hourly earnings fell for the first time since October, government figures showed Aug. 2.

“The jobs report was disappointing,” said Richard Sichel, who oversees about $1.9 billion as chief investment officer at Philadelphia Trust Co. “There’s another message there to the Fed to keep waiting. No rush to do things. No tapering in the near future, which makes the dollar a little bit weaker and gold a little stronger.”

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