Elliott Tells Clients Money-Losing Gold Still Best Value
Elliott Management Corp., the $21.8 billion hedge-fund firm founded by Paul Singer, said gold, a money-losing position for the firm this year, remains the best store of value in an uncertain global economy.
“Although our gold position lost money in the quarter and afterward, we remain unconvinced that anything resembling a genuine normalization of global economic and financial conditions has been achieved,” Elliott wrote in an addendum accompanying a first-quarter letter to investors. “There is only one store of value and medium of exchange that has stood the test of time as ‘real money’: gold. We expect this dynamic to assert itself in a large way at some point.”
Singer’s firm joins John Paulson’s Paulson & Co. in sticking with gold after bullion slumped into a bear market in April. Both are saying gold will rally because governments have accumulated too much debt and are printing money on an unprecedented scale. Paulson, whose Gold Fund declined 28 percent in the first quarter, told clients last month that purchases by central banks and demand in Asia will support the metal in the near term.
Elliott, which is based in New York, said gold will rebound because governments haven’t found a real solution to reduce the debt they have accumulated.
“It is quite frustrating to watch the price of gold fall as the conditions that should cause it to appreciate seem more and more prevalent,” Elliott wrote in the April 25 letter, a copy of which was obtained by Bloomberg News. “Gold may not exactly be a ‘safe haven’ in the sense of an asset whose value is precisely known and stable. But it surely is an asset that, in a particular set of circumstances, becomes a unique and irreplaceable ‘must-have.’”
Even with gold losses, the firm’s Elliott International Ltd. fund rose 3.1 percent last quarter, it said in the letter.
Peter Truell, a spokesman for Elliott, declined to comment on the letter and addendum.
Gold prices will close the year at $1,550 an ounce, 7.5 percent less than at the end of 2012 and the biggest drop since 1997, according to the median of 38 estimates compiled by Bloomberg. Investors are selling bullion held through exchange- traded products at the fastest pace on record, hedge funds accumulated their second-biggest bearish bet ever and futures had their biggest two-day drop in 33 years last month.
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