Last week a lot of chatter and concern occurred after a few large hedge fund managers decided to sell gold in their fund’s portfolio. John Burbank, who runs George Soros’s big hedge fund – Passport Capital, sold its gold and silver along with some other leading firms in order lock in profits. During that time we saw gold pullback over 5% and silver pullback about 30%. When this kind of action occurs it make investors question if gold and silver has had its time in the spotlight, and creates a bit of a sell-off.
So the real question is why did these hedge funds sell, and what do they see for the future of gold and silver. Recently Burbank appeared on Bloomberg to discuss his reasoning and here is what he had to say.
The recent sales are to hedge his portfolio. He said that people are taking risk out of the equation leading up to the end of QE2 where we will see a temporary correction in gold. But long-term he believes that gold will rise higher. He stated that typically gold bottoms in August, so he expects to see gold stay low until then, but the announcement of QE3 could create an earlier entrance point.
The number one reason that he states to stay in gold is that central banks around the world know that the dollar will be devalued and that Congress will not execute austerity. He additionally states that China is urging its people to own gold and silver which is creating a lot of demand.
He also believes that physical gold is the way to go due to its scarcity and he is still a long-term bull on gold. He says stay away from dollar and be in gold. He said that it is likely that the hedge fund will buy back in when the time is right. The reason for the sale is that hedge funds need to make money so they need to time markets, regardless of what their long-term belief is.
The “talking heads” spin around the sell off is that the gold’s run is over. But clearly the hedge fund managers do not believe that. Buy physical gold and hold for the long-term as a hedge against the dollar, because according professionals in the know, gold is going higher in the long run.[youtube]http://www.youtube.com/watch?v=EIdnRbgxOug[/youtube]