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December 09, 2005
Hedge Funds Bullish on Gold
It is being reported that hedge funds are increasing their investments into gold. With the prices of gold peaking at $500 per ounce, the market sentiment favors a further rise in the gold prices. The positive market sentiment for gold is driven by fundamental factors, which are favoring gold and other metals. For a long time central banks for many countries have been offloading their gold reserves in order to keep the bullion prices under control.
But, the trend has somewhat reversed. Even though the gold prices have doubled in comparison to 2001 price levels, foreign banks are stocking up their bullion reserve. The idea is to diversify their currency reserves risks out of dollars and into gold as a hedge against a falling dollar. Globally, many countries including Russia, Argentina, and South Africa have outlined plans to commence purchasing of gold reserves. Freemarketnews reports:
Hedge fund managers believe that the current trend of gold buying is just beginning. Asian central banks now hold over $2.6 trillion in foreign currency reserves, and if even a small portion of that is earmarked for gold it could send gold prices much higher.
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