Bloomberg News

Hedge Fund ‘Consensus’ Bet on Gold Rising Poses Risk, Heinz Says

June 23, 2011

June 23 (Bloomberg) -- A “consensus” bet that gold will rise is one of the largest risks facing hedge funds because investors may suffer losses across their holdings if the bet sours, said Kenneth Heinz, president of Hedge Fund Research Inc.

“One of the biggest risks that I observe comes from the very big consensus trades that everyone thinks are good ones,” Heinz said today at the GAIM hedge-fund conference in Monaco. “The long gold position” is a risk “that investors should be aware of,” he said.

Gold climbed to a record last month and is heading for its 11th year of gains, the longest winning streak since at least the 1920s. Concerns that rising inflation, Europe’s sovereign debt crisis and low interest rates have attracted hedge-fund managers such as John Paulson to invest in the metal.

Marc Faber, publisher of the Gloom, Boom & Doom report, said in an interview today that he plans to continue buying gold even though it’s likely to decline over the next three months.

George Soros is among some investors who have curtailed their bullish wagers on gold. The billionaire sold 99 percent of his bullion-backed SPDR Gold trust assets and all 5 million shares in the iShares Gold Trust in the first quarter, according to a May filing with U.S. regulators.

Gold for August delivery fell $13.90, or 0.9 percent, to $1,539 an ounce on the Comex in New York as of 8 a.m. today after the U.S. Federal Reserve dampened speculation it would expand measures to stimulate the economy.

--With assistance from Nicholas Larkin in London, Madelene Pearson in Mumbai and Weiyi Lim in Singapore. Editors: Edward Evans, Steve Bailey.

To contact the reporter on this story: Jesse Westbrook in London at jwestbrook1@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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