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Gold rush is on: Hedge fund converting a third of its assets into physical gold bullion - Wealth Managers

January 21,2013


Pacific Group to take delivery of $35 million worth of gold bars

The Pacific Group Ltd., founded by a former PaineWebber Inc. trader, is converting one-third of its hedge-fund assets into physical gold, betting that prices will go up as governments print more money to pay off debt.

The Hong Kong-based asset manager plans to take delivery of $35 million worth of gold bars that can be traded on the London Bullion Market Association and other international markets, William Kaye, its founder and chief investment officer, said in a telephone interview on Jan. 18. ...

"Gold, the way we look at it, is anywhere from being undervalued to being seriously undervalued," Kaye said. "We're in the early stages, in our judgment, of what would likely be the world's largest short squeeze in any instrument."

The next big rally in precious-metal prices may be 18 months to two years away, triggered by a "financial catastrophe," he added.

Ownership of gold through financial instruments based on it, such as Comex futures contracts, now represents more than 100 times the physical gold that exists above ground worldwide, Kaye said, citing the Pacific Group's own analysis.

"All you actually need for a major upward revaluation of gold is for a small fraction of people to physically reclaim from major central banks or other depositories that are holding your gold and using it for their purposes," he added.



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