Hedge fund debts 'will benefit long-term gold investment'

Portfolio manager Bill Belovay has claimed today (October 9th) that gold prices will continue to rise for the foreseeable future as the global economic downturn deepens.

Gold has staged a huge recovery in recent weeks with a number of banks folding and governments issuing rescue plans, leading the price to top $900 per ounce yesterday.

Now Mr. Belovay, who manages around CAD$60 million for the BMO Precious Metals Fund, has suggested that the unwinding of debt by speculative hedge funds will be to gold bullion's long-term benefit.

He said: "Now comes the time that [the funds] have to repay the gold. In looking further out, the credit crunch should eventually cause the gold price to rise because there is no capital available to start new mines, so the supply should diminish."

The concept of taking a long-term view on gold investment is one that has been touted as a sound approach by a number of market commentators over the past few months.

One of those is Suki Cooper, a London-based precious metals analyst at Barclays Capital, who said: "For gold, the environment has turned increasingly positive as investors buy gold to secure a safe haven and establish long positions."

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