With gold topping $500 per ounce, a number of hedge funds are increasing their bets that the rise in gold prices will continue, according to Reuters. The reason for their optimism on the metal is based largely on fundamental changes that are occurring which create a favorable environment for gold and other metals.
For many years foreign central banks have been selling their gold reserves in an effort to hold its price down. However, that trend has likely already reversed. Although the price of gold has doubled since 2001, foreign central banks are seeing the need to diversify their currency reserves out of dollars and into gold as a hedge against a falling dollar. Russia, Argentina, and South Africa have all recently announced plans to begin purchasing gold reserves.
