Soros Sells Gold ETF While Paulson Buys - PIMCO Favour Gold as a “Protection Against What Can Go Wrong”
Gold and silver are higher today while sterling is stronger and the
Japanese yen has again come under pressure. The yen has weakened on
deepening concerns about the Japanese economy and the BOJ Governor said
that the Japanese economy is in a “very severe state”.
Gold is trading at $1,491/oz, £919/oz, €1,055/oz and 121,850 yen per ounce.
Sterling is firmer today despite UK inflation accelerating again
more than economist forecast in April with consumer prices rising 4.5%.
Inflation remains a real threat to developed and emerging markets
which will lead to continued buying of gold and silver.
Gold’s correction has been slow and gradual (unlike silver) and it is
down 4.5% in US dollar terms so far in May. However in euro terms gold
is flat on the month with gold consolidating in euro terms and looking
like it may soon challenge the record high of €1,072/oz.
This is especially the case as the risk posed by Eurozone debt
markets is not going away anytime soon and indeed contagion remains a
The confirmation of George Soros ETF gold sale has again garnered
much media comment. Soros’ $28 billion fund decreased its holdings of
the SPDR Gold Trust, the exchange traded fund.
Soros had bought gold to protect against possible deflation, though
his fund now believes there is a reduced chance of such a condition, the
Wall Street Journal recently said, “citing people close to the
Should Soros and his fund think that inflation is now a greater risk
than deflation then it is curious that they would sell all their ETF
holdings. It is also curious as Soros is on record regarding having
serious concerns regarding the outlook for the euro and the dollar and
the dollar as reserve currency of the world.
There is of course the precedent of other hedge fund managers , such
as David Einhorn, who have also sold their gold ETF holdings but
bought physical bullion in allocated accounts due to a concern about
counter party and systemic risk.
It is quite possible that Soros’ fund has adopted a similar strategy.
This would allow Soros to discreetly accumulate bullion away from
the public and media spotlight that result from SEC filings.
Paulson & Co., the $36 billion hedge fund founded by John
Paulson kept its largest holding - $4.41 billion in the SPDR Gold
Trust. Paulson’s belief in gold is seen in the fact that those who buy
his fund can have their stakes denominated in gold rather than in
dollars, meaning the value of their investment rises and falls with the
price of bullion – lessening exposure to the dollar.
Paulson, unlike Soros, is on record as having purchased gold to protect against inflation.
PIMCO, the largest bond fund in the world, are also increasingly
allocating funds to gold in their global equities portfolio. “The
largest position in [our] fund is gold, which we think is a very good
form of protection against what can go wrong,” said Anne Gudefin,
PIMCO’s global equities portfolio manager, told Fortune magazine May
The Soros sale may lead to selling at the margin today by guru driven sellers reading simplistic articles.
However, Soros ETF sale is of far less importance than the much less
reported upon and analysed investment demand, pension demand and
central bank demand from Asia and internationally.
This demand is coming from a very low base and is sustainable. It is
prudent diversification, store of value, safe haven buying and not the
rampant speculation involving over allocation and leverage one would
associate with a bubble.
Gold is trading at $1,494.47/oz, €1,053.04/oz and £918.88oz.
Silver is trading at 34.16/oz, €24.07/oz and £21/oz.
Platinum Group Metals
Platinum is trading at $1,769.70oz, palladium at 716/oz and rhodium at $2,025/oz.
(Bloomberg) -- Gold Halts Two-Day Drop as Growth Concerns Eclipse Soros Sales
Gold gained, halting a two-day drop, as declines in Asian stocks and
commodities helped ignite demand for safer assets even after
billionaire investor George Soros sold most of his exchange-traded
Immediate-delivery gold rose 0.4 percent to $1,495.22 an ounce at
11:54 a.m. in Mumbai. Silver futures were little changed at $34.085 an
ounce, while cash silver advanced 2 percent to $34.2750, rebounding
from a 5.1 percent decline yesterday.
Asian stocks fell for a fourth day on concern that the global
economic recovery is slowing. Data today may show U.S. housing starts
hovered in April around the lows reached during the recession, while
growth in industrial production slowed.
Soros Fund Management LLC held 49,400 shares of SPDR Gold Trust as of
March 31, compared with 4.721 million at end-December, according to
the U.S. Securities and Exchange Commission. It also sold all 5 million
shares in iShares Gold Trust.
“Soros was sitting on a huge profit and like a lot of investors of
late, he was happy to take those profits off the table,” said Gavin
Wendt, founding director at MineLife Pty in Sydney. “That shouldn’t
surprise people. Gold has been rising for a decade for fundamental
reasons, which haven’t gone away.”
Accelerating inflation, Europe’s debt crisis, a weakening dollar and
fighting in Libya boosted the spot price of the metal to an all-time
high of $1,577.57 an ounce on May 2. The metal increased 5 percent this
year after a 30 percent rally in 2010, keeping it on course for an 11th
straight annual advance.
European finance ministers endorsed a 78 billion-euro ($111 billion)
bailout for Portugal, while stepping up pressure on Greece to sell
assets and deepen spending cuts in exchange for an increase in its
rescue. India’s inflation index accelerated 8.66 percent in April from a
year ago, topping an 8.5 percent rise forecast in a Bloomberg Survey,
data showed yesterday.
The dollar gained as much as 0.4 percent against six major
currencies following a drop of 0.2 percent yesterday. The index
weakened 4.3 percent this year.
The decade-long surge in gold attracted investors seeking better
returns than equities or bonds and an alternative to currencies,
helping boost holdings in exchange-traded products backed by bullion to
a record in December. ETP holdings have slipped 3.6 percent from the
Touradji Capital, founded by billionaire Paul Touradji, sold all of
its shares in the SPDR Gold Trust during the first quarter, according
to a filing to the U.S. Securities and Exchange Commission. The fund
held 173,000 shares at the end of the fourth quarter, the filing showed
on May 13.
‘Another Run Higher’
“To the extent that Soros is respected by investors, I guess it
implies that it will sew doubt in their minds and might see some
investors leave the space,” David Thurtell, Singapore-based head of
metals research with Citigroup Inc. Still, “we think gold can have
another run higher.”
Paulson & Co., the U.S. hedge fund run by John Paulson,
maintained 31.55 million shares in the SPDR Gold Trust, according to a
Eric Mindich’s Eton Park Capital Management LP reduced its stake in
the SPDR Gold Trust by 48 percent during the first quarter, according
to a government filing. Eton Park sold 2.165 million shares, cutting
its holdings to 2.328 million as of March 31, the filing shows.
Palladium demand outpaced supply by the most in a decade last year
and the shortage will continue in 2011 on higher usage by carmakers and
falling shipments from Russian stockpiles, Johnson Matthey Plc said.
Immediate-delivery palladium increased 1.1 percent to $721.75 an ounce,
while platinum rose 1.1 percent to $1,777.25 an ounce.
(Bloomberg) -- Paulson Takes $1 Billion Hewlett-Packard Stake, Adds to Gold Bet
Paulson & Co., the $36 billion hedge fund founded by John
Paulson, took a stake in Hewlett-Packard Co. and increased its holding
of Transocean Ltd., adding companies undergoing transformations to its
bets on gold.
Paulson bought 25 million shares in Hewlett-Packard, valued at about
$1 billion, according to a regulatory filing yesterday. The New
York-based fund added 17.3 million shares of Transocean, lifting its
stake to 7.7 percent and making Paulson the largest holder of the
Vernier, Switzerland-based offshore driller.
The hedge fund has said it expects to make money in the next two
years with the stocks of companies going through bankruptcy,
restructuring or reorganization. Transocean, the owner and operator of
the Deepwater Horizon drilling rig that exploded a year ago, was sued
by BP Plc last month for billions of dollars in damages related to the
oil spill. Hewlett-Packard is pushing deeper into software to try to
reverse a 16 percent drop in its shares over the past year.
Armel Leslie, a spokesman for Paulson, declined to comment on the
stock purchases. Leo Apotheker, who took over as Hewlett-Packard’s
chief executive officer Nov. 1, outlined his strategy for the first
time on March 14. The company is starting a cloud-computing service
that will let developers create applications for consumers and
businesses that run on HP servers, Apotheker said at the time.
Apotheker told top executives earlier this month that he’s bracing
for “another tough quarter” in the Palo Alto, California-based
company’s fiscal third quarter and urged deputies to “watch every penny
and minimize all hiring.” HP said in February that sales for its
second quarter, which ended in April, would miss analysts’ sales and
Betting on Takeovers
Hewlett-Packard declined 61 cents, or 1.5 percent, to $39.80
yesterday, and fell as much as 5.1 percent in extended trading.
Transocean has dropped 26 percent since the April 20, 2010, explosion
of the Deepwater Horizon in the Gulf of Mexico. It rose 7 cents to
$68.49 in New York yesterday.
Paulson’s largest fund, Advantage Plus, which bets on corporate
events such as takeovers and bankruptcies, lost 1.7 percent this year
through April with its dollar-denominated shares.
Transocean, the world’s largest offshore driller, this month
reported its biggest first-quarter profit decline in nine years amid a
worldwide surfeit of rigs used to find oil and natural gas. New U.S.
drilling rules enacted after last year’s disaster increased costs and
forced the company to spend more time carrying out shipyard work during
the quarter, Transocean has said.
Paulson also bought 6 million shares in Lubrizol Corp., the
engine-additives maker that Warren Buffett’s Berkshire Hathaway Inc.
agreed in March to buy for about $9 billion. Wickliffe, Ohio-based
Lubrizol said this month its plan to sell itself is unaffected by
disclosures of David Sokol’s investments in the firm as he pushed for
Buffett, his then-boss at Berkshire Hathaway, to buy the firm. Paulson’s
stake in Lubrizol was valued at about $804 million.
Paulson kept his $4.41 billion holding of shares in the SPDR Gold
Trust unchanged and added to stakes in mining companies including
Johannesburg-based AngloGold Ashanti Ltd.
His fund bought 97,540 American depositary receipts in South Africa’s
biggest gold producer last quarter, as well as 2 million ADRs in Gold
Fields Ltd., its second-largest producer.
Paulson has been betting on a global economic recovery, and has
purchased gold to protect against inflation. Paulson’s investors can
choose to have their stakes denominated in gold rather than dollars,
meaning the value of their investment rises and falls with the price of
George Soros, the billionaire founder of Soros Fund Management LLC,
sold most of his holdings in the bullion-backed SPDR Gold Trust and
iShares Gold Trust funds in the first quarter, while buying shares of
mining companies Goldcorp Inc. and Freeport-McMoRan Copper & Gold
Soros’s fund held 49,400 shares of SPDR Gold Trust as of March 31,
compared with 4.721 million at the end of the fourth quarter. The New
York-based fund sold all 5 million shares it held in iShares Gold
Trust. Soros bought 301,300 shares of Freeport-McMoRan and 7,600 of