Paulson adds to gold pile for first time since 2009

NEW YORK Tue Aug 14, 2012 7:09pm EDT

Related Topics

NEW YORK (Reuters) - Prominent hedge fund manager John Paulson raised his stake in gold in the second quarter of 2012, boosting investor confidence that bullion prices have more room to rise this year, a U.S. regulatory filing showed on Tuesday.

It was the first time Paulson & Co had increased its position in the SPDR Gold Trust since the first quarter of 2009, when the investment firm initially acquired 31.5 million shares of the world's No. 1 exchange-traded fund.

"The fact that you have one guy who made the most money in his gold fund is increasing his holding, you have to feel confident about that if you are a gold bull," said Mihir Dange, COMEX gold options floor trader for Arbitrage LLC.

Turnout from other major fund managers with positions in the gold ETF was mixed. While billionaire financier George Soros more than doubled his shares in the ETF, Eton Park Capital's Eric Mindich had dissolved his stake by the end of the second quarter.

Paulson & Co owned 21.8 million shares in SPDR Gold by the end of June, up about 26 percent from 17.3 million shares from March 31, a regulatory filing with the U.S. Securities & Exchange Commission showed.

The gamble resulted in a paper gain of nearly $583 million for the company as the value of its ETF holdings rose to $3.39 billion from $2.81 billion.

Paulson also raised his stake in gold mining companies including NovaGold Resources Inc and Allied Nevada Gold Corp. He also established a new position in NovaCopper Inc

In the first quarter, Paulson retained his position in the gold ETF after slashing his holdings in two previous quarters due to what analysts suspected were client redemptions.

Paulson has to date been the biggest holder of SPDR shares, using them to hedge currency exposure, while other managers such as Greenlight Capital's David Einhorn and Third Point LLC's Daniel Loeb have favored more discrete investments in physical bullion.

Analysts read the second quarter filing by Paulson as a sign that the hedge fund manager, a well-known gold bull, has not lost his faith in the precious metal as a long hedge against inflation.

Spot gold fell 4 percent in the second quarter, as prices largely traded in a $150 range following a 7-percent gain in the first quarter.

After failing to breach resistance at $1,680 an ounce in early April, bullion prices fell toward $1,525 an ounce several times in May but held each time. The metal has since pared some losses to end the second quarter near $1,600.

Disappointment over a lack of more stimulus by the U.S. Federal Reserve and other central banks has weighed heavily on gold, a traditional inflation hedge.

Overall physical bullion holdings used to back shares of the SPDR Gold Trust slipped 7 tonnes, or less than 1 percent, to about 1,280 tonnes by the end of the second quarter, following an 8 percent inflow in the first.

SOROS UP, THIRD POINT TRIMMED

Billionaire financier George Soros increased his position in SPDR Gold to $137 million in the second quarter from $52 million previously.

Last year, Soros, who had called gold "the ultimate bubble," largely dumped his stake in the ETF before the metal ran up to a record peak of $1,920.30 per ounce in September.

Traders said that some hedge fund managers have been putting their money in other assets such as equities in a bid to get higher returns as the euro zone debt crisis appeared to stabilize.

The second quarter was a difficult one for hedge funds as the equities market's benchmark S&P 500 fell 3.3 percent in the period, while funds on average lost 2.7 percent in the quarter.

(Editing by Jim Marshall)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.