"I have never been a gold bug," Paul Tudor Jones, chairman of hedge-fund giant Tudor Investment Corp., wrote in an Oct. 15 letter to investors. "It is just an asset that, like everything else in life, has its time and place. And now is that time."
Tudor has been building positions in gold and other precious metals in recent months and they now represent the firm's largest commodities exposure, he noted.
John Paulson's Paulson & Co., one of the world's largest hedge fund firms that made billions betting against subprime mortgages, is launching a new gold fund Jan. 1 and became the largest holder of the SPDR Gold Trust exchange-traded fund this year.
Greenlight Capital, run by David Einhorn, reversed a long-time aversion to gold, while Kyle Bass' Hayman Advisors LP held more than 15 percent of its portfolio in gold and other precious metals earlier this year. Eton Park Capital, headed by former Goldman Sachs trader Eric Mindich, has also gotten in on the act.
"I can't remember in 20 years so many respected investors focused on a single strategy," said Bradley Alford of Alpha Capital Management, which invests in hedge funds. "Some of these people are icons of the industry with at least 15-year track records. It's a losing proposition to bet against guys like that. They aren't billionaires because they make bad bets."
It's not only hedge funds. Managers of mutual funds and insurance company portfolios are often limited in how much gold they can buy, but these investors have been purchasing the metal for their personal accounts, according to Ed Yardeni, president of Yardeni Research.
"A surprising number of level-headed folks, who I have known over the years, are confessing to me that they've become gold bugs," he said. "They're starting to give more respect to what was for a long time considered the lunatic fringe."
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