Going for Gold?

May 18, 2011 James Heinsman Hedge Fund News

Hedge Funds Slash Gold Holdings

It’s true that it hasn’t exactly been a great time for gold. The precious gem “ended lower” in May at $10.60, following the disclosure from various hedge funds that there had been a “slashing” of its holdings. In the first quarter, Soros Fund Management announced it had sold 99 percent of its stake (4.7m shares) in “exchange-traded fund SPDR Gold Trust (GLD). This was quite an increase from the figure at the end of March, when the company only had 49,400 shares “valued at $6.9m of the fund.”

Weakened Faith in Gold

This news has weakened trust for gold investors. It has always been Soros that – at least for the last two years – has been a leader in the “charge on gold… aggressively purchasing the precious metal even after calling it “the ultimate asset bubble.” In addition, Eton Park Capital Management LP has slashed its SPDR Gold Trust stake by 50 percent, having sold almost 2.2m shares. In the second quarter of last year the company purchased 6.6m shares.

Clearly much has changed since approximately a year ago. Just at the end of June 2010, there was a peak in the ETF’s gold holdings when in an unprecedented move, the price of the gem escalated to $1,200 per ounce. This led to various investors deciding to “cash in” on their gains.

Hedge Funds Hedge Their Bets

It is not all doom and gloom though for hedge funds looking into gold. Paulson & Co. might be smiling when discussing the precious gem. Indeed the company’s stake has remained “unchanged at 31.5m shares.” Indeed, one might remember Paulson for when he put down “large bets against sub-prime mortgages” during the financial crisis. Indeed, the company’s CEO believes that gold prices have a good chance of escalating to $4,000 per ounce over the next three-five years “due to loose monetary policy in the U.S. and U.K.”

So in conclusion, there is still a way to go, but gold isn’t quite ready for the scrap metal heap just yet. It will go through ebbs and flows, but it will forever remain an extremely precious – and marketable – gem.

Eton Park Capital Management, Gold, Paulson & Co, SPDR Gold Trust,

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