No doubt the boyz have been labouring over the past 24 hours trying their best to set the tone for the next several weeks. Of course they are fighting very strong seasonal patterns and record physical demand as noted in the following statement issued by UBS earlier today..."Physical demand continues as of Monday with a near-record day of Indian demand prompted by the dollar and crude induced sell-off of the gold price. Yet long liquidation has stopped after a near-record volume of Comex liquidation over the past six weeks as we reported in our Metals Daily. This combination of heavy long liquidation and stellar physical demand remains the main reasoning behind our strong call in gold. This is an illustration that the strength we have reported in physical gold demand is not confined to India. The Middle East has also seen strong demand in August: we expect strong Turkish import numbers to be released today and tomorrow, further supporting this argument."

Also of importance, the article below clearly shows that the shadowy world of hedge funds is following the financial sector off a cliff. Considering the U.S. Presidential elections in November, this Fall will be anything but boring as intervention will follow intervention.

Regards - VHF

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Hedge Funds Continuing to Take It on the Chin

Tuesday, September 2, 2008

Yves Smith

We've remarked from time to time this year that a lot of hedge funds aren't having a particularly good time these days. The volatility that has punished mere mortals has also taken a toll on many Masters of the Universe.

The Wall Street gives an update, showing that even some of the biggest names have been bloodied. The most interesting development is that investors are starting to negotiate fees, a development observers and participants swore would never happen.

I also recall in the 1980s, when all credit cards had an annual fee and charged the legal maximum on balances (I believe 19.8%; banks could and did shop jurisdiction), experts insisted they'd never, NEVER cut prices either.

From the Wall Street Journal:

Some of the biggest hedge funds are having their worst years, and the flood of new money going into funds has slowed. That is pressuring an industry bracing for investor withdrawals and worrying about how to survive without lucrative performance fees.

Some investors willing to put new money in funds are even beginning to ask about better terms, a contrast to the situation just last year, when investors needed to beg to get into hot funds.

Big funds run by star investors, such as Steve Mandel's Lone Pine Capital, Dinakar Singh's TPG-Axon Capital Management, Tim Barakett's Atticus Capital and Tom Steyer's Farralon Capital, have lost between 7% and 25% so far this year, investors say. Ken Griffin's biggest fund at Citadel Investments is down 6% this year, its worst performance in 14 years.

Overall, hedge funds -- private partnerships that invest money for wealthy investors and institutions -- are having their worst year since at least 1990, the year that Hedge Fund Research Inc. began tracking the data. The average fund lost 3.43% this year through July, faring better than the decline of 12.65% in the Standard & Poor's 500 but below the gain of 1.05% in the Lehman Brothers bond index. August data haven't been calculated yet.