Thursday, July 8, 2010

This is Why Gold Goes Down in a Bear Market...

It is not because investors become less enchanted with gold.

It is because of forced liquidations of one type, or another, that lead investors to raise cash by selling gold. Case in point the Paulson fund.

John Paulson – one of the world’s most prominent hedge fund managers – has suffered a second consecutive month of steep losses for his flagship hedge funds, most of which are heavily geared towards a recovery in the US economy, reports FT.

As a result, Paulson has been hit with $2 billion in redemption requests

Zero Hedge speculates that Paulson had to liquidate in the last few days almost 10% of  $30 plus billion assets under management. The fund had 30% of AUM invested in gold and gold-related assets as of March 31. Thus, it is likely that Paulson has been a heavy seller of gold and gold related investments.

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