Paulson holds onto gold ETF, Soros adds gold miners in Q1

George Soros has raised his stake in Barrick Gold Corp and gold mining companies ETFs, suggesting the big names in hedge funds took advantage of lower gold prices to increase positions in the precious metal - AFP Photo.

NEW YORK: Hedge fund Paulson & Co in Q1 maintained its stake in SPDR Gold Trust, the world's biggest gold-backed exchange-traded fund as bullion prices rebounded from their biggest annual loss in 32 years in 2013, while PIMCO dissolved its gold ETF investment.

George Soros raised his stake in Barrick Gold Corp and gold mining companies ETFs, suggesting the big names in hedge funds took advantage of lower gold prices to increase positions in the precious metal used by many as a hedge.

Investors pay close attention to the quarterly filings by Paulson and other notable hedge fund managers because they provide the best insight into whether the so-called "smart money" has lost faith in gold as a hedge against inflation and economic uncertainty.

"Some institutions are stepping up to buy gold this year just like you would expect them to do when they find an asset valued at these attractive levels," said Adam Sarhan, CEO of New York-based Sarhan Capital.

Paulson & Co, led by longtime gold bull John Paulson, owned 10.2 million shares in the ETF worth US$1.27bil on March 31, unchanged from its holdings on Dec. 31, a filing with the US Securities and Exchange Commission showed on Friday.

That represents a gain of around US$76mil as the price of gold gained 6.5% in the first quarter, following a drop of around 9% in the fourth quarter.

This marks the third consecutive quarter Paulson has stuck to his stake in the gold ETF.

"It's a plus for the market as big players are still holding onto gold to a degree, but I don't think that's reflective of the market tone," said Bill O'Neill, partner at commodities investment firm LOGIC Advisors in New Jersey.

Gold prices were still 7.5% higher for the year but market watchers said the yellow metal's failure to rally on geopolitical tensions and lacklustre physical demand suggested downside risks.

In the second quarter of 2013, Paulson slashed its stake by more than half when bullion prices plummeted US$225 between April 11 and 15, a record two-day drop for gold.

Among large institutional investors, PIMCO has dissolved its position in SPDR Gold Trust, marking its sixth consecutive quarterly cuts. PIMCO held 6.3 million shares of the gold ETF in the second quarter of 2012.

Some institutional investors continued to remain bearish on gold investments as the metal's price came under heavy pressure from rallying equity markets and an improving economic outlook.

SPDR Gold Trust held near a four-year low at about 800 tonnes of gold at the end of the first quarter, largely unchanged from its fourth quarter level.

Institutional investors' massive stakes in SPDR Gold Trust have tremendous influence in gold prices as redemptions of their massive ETF mean dumping the metal in the open market.