It is difficult to say if HSBC is the first migratory penguin over the icy slope but these funds do tend to move in herd formation.

Regards - VHF

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HSBC Fund Returns to Buying Gold to Hedge Against Inflation

By Chanyaporn Chanjaroen

Dec. 3 (Bloomberg) -- HSBC Investment Management’s $2.6 billion Absolute Return Service started buying gold again on expectations that inflation will accelerate and may start adding coffee, sugar and grains next year.

Gold now accounts for 3 percent of the portfolio, fund manager Charlie Morris said by phone from London yesterday. Morris had sold the metal in July when prices were about $900 an ounce. Gold has declined 15 percent since the end of July.

“Gold is the best supported of all commodities,” said Morris, whose fund has lost 14 percent this year. “People are buying in anticipation” of inflation, he said.

The precious metal is the fourth-best performer in the UBS Bloomberg CMCI Index of 26 commodities this year, behind cocoa, refined and raw sugar. Gold demand rose 18 percent in the third quarter, according to the World Gold Council.

Morris said he would likely add agricultural commodities including grains and cocoa to the portfolio next year.

“When we get a technical buy signal, we will have 7, 8, 9 percent” in agricultural commodities, said Morris. Gold may increase to as much as 10 percent of holdings when the price shows “strength,” he said.

Industrial metals are the weakest commodities for now, Morris said. Lead and zinc have already declined more than they did during the Great Depression, Barclays Capital said yesterday.

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