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Gold Prices Down This Week, But Big Money Stays Invested – Money Morning

This is a syndicated repost courtesy of Money Morning. To view original, click here. Reposted with permission.

It’s been another painful week for the precious metal amid what’s been one tough year for gold bulls.

Gold futures ticked up Friday, following a two-day dip that left gold prices at levels not seen since early summer.

In mid-afternoon trading, gold for December delivery inched up 0.13%, or $1.60, to $1,240.90.

Still, prices are set for a sharp weekly loss. Tracking the most active contracts, future prices for the yellow metal traded roughly 3.2% lower for the week, according to data from FactSet.

Gold futures tumbled to a four-month low Wednesday following the release of the minutes from the U.S. Federal Reserve’s Oct. 29-30 meeting. The minutes showed some members still expect a winding down of the central bank’s $85 billion a month bond-buying program in the coming months – perhaps as early as its Dec. 17-18 meeting.

Front-month December contracts, the most actively traded contracts, slumped 2.6%, to $1,240.20 an ounce, after the 2 p.m. release. That marked the lowest level since July 9.

Pressuring precious metal prices Thursday was the weekly report from the Department of Labor. Data showed first-time jobless claims dropped by 21,000 to 323,000 from the prior week’s upwardly revised 344,000. The consensus view was for a more moderate drop in claims to 335,000.

The better-than-expected decline further stoked taper talk.

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A number of analysts, however, maintain the Fed won’t take away the fiscal punch bowl until jobs data shows a more solid and substantial improvement.

Indeed, the U.S. jobless rate currently sits at an unhealthy 7.3%. The Dec. 6 employment report will be especially important and carefully scrutinized for signs of improvement in the labor market and possible timing of a Fed QE taper.

Big Money Investing in Gold

Gold has tumbled 26% so far in 2013 and is on pace to log its first annual loss in 13 years. The yellow metal is down roughly 35% from its record high.

With the economy recovering, (government-reported) inflation tame, and stocks on a record run, gold has lost some of its luster.

This week’s fresh report from the Organisation for Economic Co-operation and Development (OECD) projects worldwide economic improvement and growth will pick up in 2014, citing a rise in its index of leading indicators.

Furthermore, fueled by low interest rates and renewed optimism of forward global growth, the Dow Jones Industrial Average closed above 16,000 for the first time Thursday. The 30-stock benchmark has set 40 all-time highs in 2013, and is up a hefty 22.2% year to date.

While some investors have given up on gold, there’s some big money that is staying invested.

Among buyers is David Einhorn, co-founder and president of hedge fund Greenlight Capital, best known for making market-moving short wagers. Gold remains an important part of Einhorn’s portfolio, even amid the yellow metal’s steep slide.

Financial filings show that at the end of September, Greenlight Capital held some 8.8 million shares, or roughly $220.1 million worth, of the Market Vectors Gold Miners ETF (NYSE: GDX).

“What we really own gold for is just in case something goes really haywire. What I’m thinking about is mostly the monetary policies and fiscal policies being run by the big economies,” Einhorn said in a CNBC interview Thursday.

Meanwhile, billionaire hedge fund manager John Paulson, who has been betting that gold would rally as a hedge against inflation as global central banks flood the worldwide economy with money, also remains invested.

Paulson hasn’t added to the holdings, but his fund will keep its position in gold stocks (which has shrunk from $1 billion at the end of 2012 to $370 million) while letting bullion-related options expire, Paulson explained at the firm’s annual meeting Thursday in New York.

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