Has gold market volatility changed the fundamental reasons for physical gold ownership?
by Jonathan Kosares (extension #110) Centennial Precious Metals, Denver Volatility in the gold market is here to stay. Thus far in 2006 gold has been as low as $525 and as high as $725, sometimes changing $50 or more in a single week. Friday, October 13th’s price rise of $12 marks the 50th day this year that gold has moved more than $10 in a single day in either direction. By comparison, only nine days in all of 2005 showed moves of more than $10, and all nine occurred in the last three months of the year. This essay offers one possible explanation for this erratic price movement related to the rapid growth of hedge funds and their investment tactics, and also speaks to the mounting systemic risk if these practices continue to proliferate. “There are more than 8000 hedge funds in the US with $US 1.2 trillion in assets, more than double the figure five years ago, according to Hedge Fund Research.”1 Despite what their name implies, hedge funds typically concentrate assets into a couple o
