Gold and Silver Edge Higher While Hedge Funds Buy Miners

On Tuesday, gold futures for December delivery climbed $3.80 higher to settle at $1,782.20 per ounce, while silver futures jumped 43 cents to settle at $34.46.

U.S. retail sales rose 0.5% in October, beating expectations and giving the economy a much-needed boost as it entered the final quarter of 2011. Last month’s gain followed a 1.1% increase in September.  Demand for automobiles climbed in October, while purchases of electronics jumped by the most in two years. Consumer spending, which accounts for roughly 70% of the U.S. economy, must continue its upward trend in order to bolster against the growing European credit crisis that continues to threaten sales overseas.

Investor Insights: What Are These 3 Hedge Funds Doing With Gold?

It was a mixed day for gold and silver miners.  Shares of Yamana Gold (NYSE:AUY) edged .30% lower, while AngloGold (NYSE:AU) edged .25% higher in afternoon trading.  Although the iShares Silver Trust (NYSEARCA:SLV) gained .50% before the close, shares of First Majestic Silver (NYSE:AG) declined by nearly 2%.

John Paulson, the founder and President of Paulson & Co., disclosed in his latest 13-F filing that Paulson & Co. reduced its massive SPDR Gold Trust ETF (NYSEARCA:GLD) position from 31.5 million shares to just under 20.3 million shares, representing a 36% decrease.  Although this large change may reflect a sentiment shift, many believe that Paulson liquidated GLD due to fund redemptions.  Paulson’s assets under management fell from $29 billion to $20.7 billion in the third quarter.

David Einhorn, the head of Greenlight Capital, announced a new stake in Barrick Gold (NYSE:ABX) of 1.35 million shares, while also adding a new stake of 1.9 million shares in the Market Vectors Jr. Gold Miners ETF (NYSEARCA:GDXJ).  Mr. Einhorn more than doubled his Market Vectors Gold Miners ETF (NYSEARCA:GDX) position from 3.5 million shares to nearly 7.3 million shares in the third quarter.  Dan Loeb, manager and founder of Third Point LLC, also raised his stakes in Barrick Gold from 1.85 million shares to almost 2.3 million shares.

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