Elliott Management On Gold, Currency Debasement And Severe Inflation

In its third quarter letter to shareholders, Elliott Management indicated that is has been and will remain long on gold, regardless of recent price action.

The firm’s long position is not because it is seeking to speculate on short-term price movements. Rather, it holds gold as a hedge against “paper money debasement and severe inflation.”

The letter observed that the “price of gold declined this past quarter on prospects of higher U.S. interest rates and strength in the dollar. The decreased concern for inflation undercut investors' demand for gold. Existing long positions were unwound throughout the summer, sweeping away in the process any price gains for the year, and consensus expectations for the rest of 2014 seem to follow this sentiment.”

Over the short-term the firm noted that the “lack of strong physical demand and exchange-traded fund liquidations are likely to remain the key...price drivers. Additionally, continued improvement in the U.S. labor market and indications of continued growth in the U.S. economy are expected to suppress investor interest for gold in the near term.”

Despite the expected lackluster performance of gold in the near term Elliott is keeping “long positions in place and renewing them as options expire or become short term. Both the long-term bull case and the case for gold as a portfolio hedge continue to be strong.”

The firm concluded that there “is no way to predict when sentiment will shift and investors across the globe will start seeing gold as a must-have protection against paper money debasement and severe inflation.”

SPDR Gold Trust (ETF) GLD recently traded at $110.00, up 0.19 percent.

Posted In: Hedge FundsCommoditiesMarketsETFsGeneralElliott Management
We simplify the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!

Loading...