(Adds comment, more details from fund filings)
By Frank Tang
NEW YORK Aug 14 Hedge fund Paulson & Co
maintained its stake in the world's biggest gold-backed
exchange-traded fund, SPDR Gold Trust, in the second
quarter, while Soros Fund Management LLC sharply boosted his
investment in gold mining stocks.
Legendary investor George Soros nearly doubled his ownership
in a U.S. gold mining companies ETF and initiated new stakes in
other gold producers, suggesting the big names in hedge funds
continued to have confidence in the yellow metal.
Investors pay close attention to the quarterly filings by
notable fund managers because they provide the best insight into
whether the so-called smart money has changed its sentiment
toward gold as a hedge against inflation and economic
New York-based Paulson & Co, led by longtime gold bull John
Paulson, owned around 10.2 million shares in the ETF worth $1.31
billion on June 30, a filing with the U.S. Securities and
Exchange Commission showed on Thursday.
That represents a gain of around $45.3 million as the price
of gold climbed nearly 3.5 percent in the second quarter.
In the first quarter, gold posted a gain of 6.5 percent as funds
added gold back to their portfolios after aggressively selling
the yellow metal last year.
"It shows that the premier players in investing still have
faith in gold," said Bill O'Neill, partner at commodities
investment firm LOGIC Advisors in New Jersey.
Some gold investors, however, are increasingly cautious as
an improving U.S. outlook could prompt the Federal Reserve to
raise interest rates soon.
Market watchers said gold's outlook remains bullish as long
as real interest rates, calculated by deducting inflation rates
from nominal interest rates, stay negative.
"Gold has become increasingly attractive to hedge fund
managers who are long-term investors as real interest rates
remain negative," said Axel Merk, chief investment officer of
the $400 million Merk Funds, a family of currency mutual funds
and the Merk Gold Trust, a gold ETF.
FUNDS BUY GOLD MINING STOCKS
Soros Fund Management increased his stake in Market Vectors
Gold Miners ETF to 2.05 million shares valued at $54
million at the end of the second quarter, compared with 1.16
million shares in the first quarter.
"Gold mining stocks are considered relatively cheap. It also
suggests that Soros may be thinking gold prices are near the
bottom of the range," O'Neill said.
Soros also initiated new gold investments including 1.33
million shares in call options of the Gold Miners ETF valued at
$35 million, and 1 million equity shares in Allied Nevada Gold
But Soros also slashed his stake in Barrick Gold Corp
by more than 90 percent to less than half a million
shares valued at just $8.8 million in the second quarter after
boosting ownership of the gold miner in the first quarter.
(Reporting by Frank Tang; Editing by Matthew Lewis, James
Dalgleish and Lisa Shumaker)