The gold price plunge that rattled investors last week will give way to a rebound, say some hedge fund giants. Funds increased bets on gold rallying after prices plunged the most in 33 years, underscoring billionaire John Paulson’s view that bullion will stage a comeback. A two-day, 13% drop in gold through April 16 drove prices to a two-year low, erasing $560 billion from the value of central-bank reserves since the metal peaked in 2011. Official-sector purchases and demand in Asia will support bullion, Paulson & Co. said in a letter to clients, joining BlackRock Inc., the world’s biggest money manager, in predicting a rebound. Central-bank stimulus will “eventually lead to inflation,” the Paulson letter also said, reiterating a bullish outlook for bullion. The hedge fund is the biggest shareholder in the SPDR Gold Trust, the largest exchange-traded fund backed by the metal. The price plunge was a “panic event,” Catherine Raw, a fund manager in London at BlackRock, said last week.
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