Billionaire John Paulson, who lost over $700 million after April’s gold crash, has cut his holdings by half. As one of the last major institutional holders of gold ETFs, Paulson & Co.’s exit may signal the bottom in the gold market we’ve been waiting for.
Two major institutional players also give us reason to be enthusiastic. JP Morgan is advising its customers to go long on gold “with a four-five week time horizon,” citing further supply squeezing in South Africa and seasonal pickup in India:
“Gold supplies could be constrained in September if labor strikes are initiated in South Africa. There’s typically some positive seasonality to the gold price in August/September helped by India, which is still the largest single (28%) gold market.
“Often this strength correlates with the Denver gold conference. The conference attracts many of the larger gold investors, and given the other positives for the metal… we would not be surprised to see a stronger gold price in the run-up to the show.
“We’d encourage shorter-term investors to consider getting long the gold space with a four-five week time horizon.”
And Goldman Sachs recently increased its position in SPDR Gold Trust to 4.4 million shares… more than six times what it held at the end of March.
The market is already taking notice. Spot gold blasted past its $1,350 resistance earlier today and is headed for higher ground.
“It’s been a crazy ride,” says Greg Guenthner in today’s Daily Reckoning, “but the breakout is finally here. I expect gold to continue its volatile rise in the near term.” Greg recommends snatching up mining stocks. Matt Insley over at Daily Resource Hunter recommended mining company Franco-Nevada (FNV) on Aug. 14.
For The Daily Reckoning
P.S. Every morning, Greg Guenthner’s Rude Awakening examines the day’s market moves and shows you where to find opportunities in today’s volatile markets. Click here to get Greg’s tips delivered right to your inbox!
Individuals make long-term choices to protect their wealth in gold. Meanwhile, institutions and other Big Money buffaloes follow their herd instinct. Still, whatever the background to it all, it’s a rough time for resource investors in precious metals and the mining space. How does one deal with it?
Jason M. Farrell is a writer based in Washington D.C. and Baltimore, MD. Before joining Agora Financial in 2012 he was a research fellow at the Center for Competitive Politics, where his work was cited by the New York Post, Albany Times Union and the New York State Senate. He has been published at United Liberty, The Federalist, The Daily Caller and LewRockwell.com among many other blogs and news sites.
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