As many Hedge funds issued their 13Fs on February 14th, one in particular has evaluated there is taking place an inevitable race to the bottom for the world's paper currencies, and is purchasing gold as a result. Lone Pine, which is run by hedge fund manager Steve Mandel, reported that the decision to buy gold was not based an investment for profit, but instead on the belief that the efforts of central banks and global paper currencies are beyond the point of sound money.
'We re-established a position in gold during the quarter. Although we certainly have misgivings about an asset that does not produce cash, it seems very likely that developed market governments will try to inflate away their outsized debt burdens, debasing their currencies in the process. Gold is the “currency” that will likely hold its value as these developed world paper currencies engage in a race to the bottom." – Steve Mandel, Lone Pine via Zerohedge
Lone Pine is not the only institution that feels that global currencies are losing their value as investments. In 2011, global demand for physical gold rose by .04% to over $200 billion dollars, and has been increasing steadily over the past four years. This is a trend reversal from last decade when central banks were more apt to sell gold, as when Britain foolishly dumped 60% of their reserves at an average of $275 per ounce.
With the Euro under extreme pressure to remain solvent, and the dollar remaining too strong to deal with the Federal governments maturing debt, central banks are being left with little choice but to print money, and devalue their paper currencies even more. This will ultimately push gold much, much higher, and many entities and agencies are preparing for that day as determined by their recent gold purchases.
Hedge funds are financial entities that are created to use large capital deposits to leverage the markets for high returns. Holding gold as an investment is not a normal course of action for most hedge funds, as it is the equivalent of holding cash in lieu of a security. Thus, with Lone Pine's decision to move into gold instead of holding paper currencies such as the dollar, it speaks very strongly that more financial advisors are seeing the writing on the wall, and the near future crash of global fiat currencies as they all race towards the bottom.
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