Thursday, April 18, 2013

Weird's Deep Thoughts (Thursday Insight Edition): The Gold Plunge May Have Been The First ETF-Led Death Spiral

“….If it was just ETFs and some retail money, then it wouldn’t be so bad. The real problem comes from hedge funds. While mom and pop and the die hards might sit on their gold holdings, hedge funds don’t have that luxury. Funds have monthly and quarterly performance targets. Watching a market meltdown doesn’t bring out buyers, it forces selling.

This is especially true in assets that have seen “mission creep”. It is one thing for a commodity focused hedge fund to lose on gold. It isn’t even so bad if a global macro fund does, but the problem is when funds that really don’t have much business being in gold have added positions. As a “hedge” or as an “alternative”. Whatever the excuse was, many funds had accumulated some gold….

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