Major hedge funds Elliott Management, Caxton Associates and Dymon Asia Capital are bullish on gold (XAU), the Financial Times reported today. This is due to “unfettered fiat currency printing,” according to Danny Yong of Dymon Asia Capital. Elliott in particular is one of the top ten hedge funds, ranked globally by the amount of assets under management.
The context of this emerging preference is a concern that recent measures taken by central banks of nearly all countries around the world will dilute the values of their respective currencies, triggering inflation.
Of course, these measures have come in response to the COVID-19 epidemic and its economic consequences, with the global economy decimated due to a collapse in global demand for commodities, which has led to an unemployment crisis. Governments have stepped in to shore up their financial sectors as well as the so-called “real economy”.
a “fanatical debasement of money by all of the world’s central banks”
Many economists have and will argue that such monetary policies are necessary and the only cogent response to the growing crisis. For them, the real question is how to use the brief window of stability they have bought; some argue for aggressive fiscal spending married to the monetary relief.
No matter who is right, the effects on government debt cannot be denied. Taking the US as an example: per the Federal Reserve's government website, government debt has rapidly ballooned during 2020 from $4.1 to $6.6 trillion — and this does not even take into account $3 trillion in direct aid to U.S. citizens.
Gold, and now Bitcoin, are seen as natural responses to such concerns of inflation caused by excessive money creation. Investors see the precious metal, and to a certain degree the flagship cryptocurrency, as a hedge against currency debasement.
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