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Respected hedge funds appear to have acquired a substantial appetite for gold.

Filings show that big funds have increased their buying of bullion in recent months. Among them, Eton Park Capital Management reported that it has about $800-million (U.S.) in the popular SPDR Gold Trust ETF and George Soros has about $600-million.

John Paulson's fund holds a $4-billion allocation in GLD, which makes his stake almost as large as the other two physically-backed gold ETFs -- iShares COMEX Gold ETF and ETFS Gold Trust ETF -- combined, notes Eric Dutram at

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"I can't remember in 20 years so many respected investors focused on a single strategy," Bradley Alford of Alpha Capital Management, told Mr. Dutram. "Some of these people are icons of the industry with at least 15-year track records. It's a losing proposition to bet against guys like that. They aren't billionaires because they make bad bets."

The concern is that if the biggest names in investing are now pouring cash into gold, other institutional investors will follow, driving up the price and setting the stage for a massive correction.

"This demand by institutional investors could end up having devastating consequences," writes Mr. Dutram. "Should the companies decide to sell their holdings all at once, it could create a herd effect in the market and result in a plunge in gold ETF prices. So while the massive buying of gold ETFs is certainly bullish, a continued run higher is no sure thing."

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