Hedge fund icon Paul Tudor Jones has turned bullish on gold, based on concern of rising inflation and expectations of strong demand from central banks and exchange traded funds.
“I have never been a gold bug,” Jones, head of Tudor Investment, wrote in a letter to investors obtained by Bloomberg.
“It is just an asset that, like everything else in life, has its time and place. And now is that time.”
Jones is joined in his bullishness toward gold by two other hedge fund heavies, John Paulson and David Einhorn. The precious metal has risen to record highs above $1,070 an ounce in recent days.
“As one would expect, rising inflation suggests higher gold prices, especially when the Fed is perceived to be behind the curve,” Jones wrote in the letter.
“Gold appears to be cheap. In our view, gold’s value should increase as its scarcity relative to printed currencies increases.”
Central banks were net buyers of gold in the second quarter for the first time since 2000, and assets of SPDR Gold Trust, the biggest ETF backed by bullion, aren’t far from their June 1 record high of 1,134 metric tons.
In addition, mine production has been “stagnant” the past decade, Jones points out.
He, Paulson, and Einhorn aren’t the only gold bulls.
Federated Investment Strategist David Tice told Yahoo! News: “We don’t think it will end until we get to $2,500, $3,000 or so. And gold could go beyond that.”
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