World’s largest hedge fund says buy gold as price rally nears $1,300
On Thursday, safe haven buyers continued to boost the gold price, lifting the metal to its highest level in more than two months.
Gold futures in New York for delivery in December, the most active contract, jumped to a high of $1,293.80, up 1% from Wednesday’s settlement price. It was another day of heavy volume with 23m ounces traded by lunchtime. Gold is up 12.3% so far in 2017.
Gold’s rally was sparked by comments from US President Trump who said in response to reports North Korea has developed miniaturized warheads, that further threats from the country would be met with “fire and fury like the world has never seen.” The totalitarian state then threatened to fire ballistic missiles towards a US military base on the island of Guam west of the Philippines.
Gold bulls also received support from the world’s largest hedge fund – Bridgewater Associates – advising clients to invest 5% to 10% of their assets in gold. Business Insider quoted from the note written Wednesday by the founder of the $160 billion fund Ray Dalio and staffers Bob Elliott, Steven Kryger and Neil Hannan:
Most immediately, during the calm of the August vacation season, we are seeing 1) two confrontational, nationalistic and militaristic leaders playing chicken with each other, while the world is watching to see which one will be caught bluffing, or if there will be a hellacious war, and 2) the odds of Congress failing to raise the debt ceiling (leading to a technical default, a temporary government shutdown, and increased loss of faith in the effectiveness of our political system) rising. It’s hard to bet on such things one way or another, so the best that one can do is be neutral to such possibilities.
When it comes to assessing political matters (especially global geopolitics like the North Korea matter), we are very humble. We know that we don’t have a unique insight that we’d choose to bet on …We can also say that if the above things go badly, it would seem that gold (more than other safe haven assets like the dollar, yen and treasuries) would benefit, so if you don’t have 5-10% of your assets in gold as a hedge, we’d suggest you relook at this. Don’t let traditional biases, rather than an excellent analysis, stand in the way of you doing this (and if you do have an excellent analysis of why you shouldn’t have such an allocation to gold, we’d appreciate you sharing it with us.)