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Tuesday, December 23, 2003

There is an article in today's Wall Street Journal about how hedge funds are investing more money into commodities (see Hedge Funds Make Big Bets on Commodities subscription required).

But hedge funds -- investment vehicles for the wealthy -- have also been pouring money into commodities this year, adding to demand, helping to drive prices higher and increasing volatility. This speculative buying, aided by low interest rates that make borrowing cheap, is adding another variable to the supply/demand equation.

Commodities include many things besides gold. Oil and gas, cocoa and coffee, other metals such as copper. But gold is part of what the hedge funds have been buying.

Both the Comex and the London Metal Exchange are experiencing record levels of trading in the futures contracts, or agreements to buy or sell a given commodity at some time in the future. For example, at Comex, a division of the New York Mercantile Exchange, gold and copper futures set monthly volume records in November. Gold futures volume totaled 1,397,296 contracts, breaking a six-year-old record.


# posted by Half Sigma : 11:51 AM

Sunday, December 21, 2003

Interesting artiicle at Mineweb about how British investors prefer pure gold stocks to diversified ones (see AIM investors want pure gold). Sounds smart to me. Investors can create their own diversification by buying shares of different companies in different industries. Management usually wants diversification because it makes their own jobs more secure, not because it benefits shareholders.

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Mahendra predicts that gold will hit $422 this week. I hope he's right. Link to prophecy.


# posted by Half Sigma : 9:16 PM

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