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By Kishori Krishnan Exclusive To Gold Investing News

Gold was softer on Monday but holding within reach of a seven-week high as inflation and economic fears boosted its appeal as a hedge against uncertainty.

Spot gold bid at $928.50 an ounce in the early hours of Monday, compared with $930.70 late in New York on Friday, when it touched $933.65, its highest level in seven weeks, after data showed U.S. core inflation in April rose more than expected. Also supportive were doubts about economic recovery, especially in the United States, the world’s largest economy.

“The outlook for gold is a lot better than the outlook for the U.S. economy,” said Charles Kernot, mining analyst at Evolution Securities. “There is still a lot of uncertainty in terms of the outlook for the global economy…People are now looking at it being a much slower recovery (than expected).”

In London, gold gains were limited on the back of a stronger dollar. Oil hovered little changed above $56 a barrel, pausing from the previous session’s near 4 per cent loss. The world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, said holdings stood at 1,105.62 tonnes as of May 15, unchanged from the previous business day.

“If the stock market goes down a little, people may buy gold as insurance, however, if the stock market goes down a lot, people may need to sell gold to meet margin calls,” said Wallace Ng, chief precious metals dealer at Fortis Bank’s commodity derivatives unit.

Sixteen of 29 traders, investors and analysts surveyed by Bloomberg News, or 55 per cent, said gold may climb this week. Nine people forecast lower prices and four were neutral.

Among other precious metals for immediate delivery, silver rose 0.2 per cent to $14.02 an ounce, platinum was up 1.1 per cent at $1,117.25 an ounce and palladium added 0.3 per cent to $225.50 an ounce as of 2:03 p.m. Singapore time.

Global news

Turkey’s export-heavy gold jewellery industry, hit hard by the global economic downturn, is pinning its hopes on an early recovery in the U.S., a leading Turkish jeweller said.

Egypt is set to produce the first block of gold bullion from the Sukari mine in the Eastern Desert in June, Egypt’s state-owned news agency MENA quoted Minister of Petroleum and Mineral Resources Sameh Fahmy as saying on Sunday.

In Italy, the number of precious metals jewellery items sold in Europe’s biggest market, is expected to fall 30 per cent this year as economic downturn hits consumer demand, a top industry official said on Sunday.

In Australia, gold stocks were up on Monday, as the precious metal increased $5.00 to US$929.50 an ounce. Sino Gold was up 3.9 per cent to $5.33 and Anglogold (NYSE:AU) was up 2 per cent to $9.95.

Paulson’s stocks

A quick look at some moves from the hottest hedge fund manager, John Paulson.

Paulson continues to grow his gold stash as he views inflation rather than deflation the coming scourge. If you are not familiar with John Paulson, he mopped up the hedge fund industry in 2007 and 2008 with bets against subprime loans and financials. In 2007 alone he personally earned $3 Billion.

Due to the size of his funds it is not so easy as it once was for him to move in and out of markets, analysts say, but his forays into gold are now joining his moves to begin snapping up mortgage backed securities.

Another prominent hedge fund manager – David Einhorn has also joined the fray buying gold more directly through the well known ETF (GLD).

Bloomberg reports Paulson & Co., the hedge-fund firm run by billionaire John Paulson, increased its investment in gold and gold-mining shares in the first quarter, according to a regulatory filing. As of the end of the first quarter, Paulson was the largest holder of SPDR Gold Trust, an investment fund that buys gold bullion. The New York-based firm owned 8.7 per cent of the fund, valued at $2.8 billion as of March 31, according to a filing with the U.S. Securities and Exchange Commission.

That position was established as a hedge, the company said in a statement, because its funds have a share class that is denominated in gold rather than in dollars or euros. Paulson bought or added to several gold companies in the quarter as well. He purchased a 15 per cent stake in Market Vectors Gold Miners ETF, (GDX) a fund that mirrors the move in the Amex Gold Miners Index. That stake was worth $638 million at the end of the quarter.

Paulson also bought a 2.6 per cent of Gold Fields Ltd. (GFIOF), becoming the fourth-largest holder of the Johannesburg-based gold miner. The investment firm, which manages $26 billion, also bought an additional 2.4 million shares of Kinross Gold Corp. (KNRFS) Paulson owned 4.4 per cent of the Toronto-based gold producer and was its third-largest holder at the end of the quarter.

Paulson reported owning an 11.3 per cent stake in AngloGold Ashanti Ltd., also based in Johannesburg, in March. Paulson’s largest fund, the Advantage Plus Fund Ltd. returned 4.8 per cent through April.

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