18/05/2016 07:28 AST
Billionaire hedge-fund manager John Paulson retreated from gold for a second quarter, even as prices posted the biggest jump in three decades, while Soros Fund Management LLC bought shares in Barrick Gold Corp.
At the end of March, Paulson & Co owned 4.8mn shares in the SPDR Gold Trust, the biggest exchange-traded product backed by bullion, a government filing showed. That compares with 5.8mn shares at the end of December.
Gold futures have climbed 20% this year, including a 17% surge in the first three months that marked the best quarter since 1986. Demand for gold as a store of value has risen amid a weakening dollar and scepticism over the effectiveness of central banks’ policies to spur inflation and support growth.
Investors have poured more than $16bn into exchange-traded funds backed by precious metals this year, and increased their holdings in the SPDR trust by 28% in the first quarter, the most since 2009.
In the first quarter, Soros Fund Management bought 19.4mn shares for a $263.7mn stake in Barrick, the largest bullion producer, according to a regulatory filing.
The holding is the Soros Fund’s biggest, accounting for 7.5% of the portfolio. Eton Park Capital Management, the hedge fund firm founded by Eric Mindich, purchased 3.59mn shares of the SPDR Gold. Trust during the quarter for a $422mn stake, a new position.
Billionaire hedge-fund manager Paul Singer has said “it makes a great deal of sense to own gold,” as central bankers debase their currencies.
Stan Druckenmiller, the billionaire investor with one of the best long-term records in money management, said he’s wagering on gold as policy makers experiment with “the absurd notion of negative interest rates.” Hedge-fund manager David Einhorn said “increasingly aggressive and counterproductive monetary policies are bullish for gold.”
Joh Berenberg Gossler & Co, a bank based in Hamburg, has said it also plans to increase its holdings of gold and other precious metals, betting that demand will be lifted by uncertainty surrounding the outcome of the US elections and the vote on UK membership of the European Union.
The metal is benefiting from mounting speculation that the Federal Reserve will be slow to tighten monetary policy, while lending rates in Japan and the eurozone are already below zero. Bullion tends to fare well when rates are low, as the metal only delivers returns through price gains. Traders put the odds that the Fed will raise US rates by December at about 56%, down from more than 90% at the beginning of the year, according to Fed-fund futures data compiled by Bloomberg.
Paulson started his foray into gold in early 2009, betting that prices would rise amid unprecedented monetary stimulus. Bullion climbed 70% from December 2008 to June 2011 as the Fed bought debt and held borrowing costs near 0%. Prices slumped to a five-year low in December before the central bank raised US rates. Gold traded little changed at about $1,274 an ounce yesterday.
Paulson uses the SPDR product to back his funds’ gold share classes, which offer holdings denominated in bullion for investors interested in decoupling their assets from the value of the dollar.
Armel Leslie, a spokesman of New York-based Paulson & Co with Peppercomm, didn’t immediately return a call and e-mail seeking comment after regular business hours.
Gulf Times
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