Bloomberg News

Gold Declines as Dollar’s Gains Curb Demand; Paulson Cuts Bet

November 16, 2011

Nov. 15 (Bloomberg) -- Gold declined for a second day in London as a stronger dollar curbed demand for the metal as an alternative asset. Billionaire investor John Paulson cut his holdings by 36 percent in the SPDR Gold Trust last quarter.

The euro fell versus the dollar for a second day after Italy’s borrowing costs surged to the highest level since 1997 at a note auction and Mario Monti, the nation’s premier-in- waiting, struggled to get political parties to help form his new Cabinet. While Paulson and Eric Mindich sold shares in the SPDR exchange-traded product as prices rallied to a record, investors George Soros and Paul Touradji bought shares, according to Securities and Exchange Commission filings.

“A stronger U.S. dollar would limit the upside in gold for now,” Andrey Kryuchenkov, an analyst at VTB Capital in London, wrote today in a report. Still, “the stalemate in Europe cannot be resolved overnight, while concerns over excess liquidity on both sides of the Atlantic as a result of lax monetary policies also add to a positive gold scenario.”

Immediate-delivery gold fell $17.10, or 1 percent, to $1,763.32 an ounce by 9:18 a.m. in London. Gold for December delivery was down 0.8 percent at $1,764.10 on the Comex in New York.

Bullion is in the 11th year of a bull market and prices reached a record $1,921.15 an ounce on Sept. 6 as investors sought to diversify away from equities and some currencies. Holdings in gold-backed exchange-traded products reached a record 2,330 metric tons on Aug. 18 and were at 2,312.3 tons yesterday, little changed from Nov. 11, data compiled by Bloomberg show.

Soros Raises Stake

Paulson & Co. cut its stake in the SPDR Gold Trust, the biggest exchange-traded fund backed by the metal, to 20.3 million shares in the third quarter from 31.5 million as of June 30, while Mindich’s Eton Park Capital Management LP sold its entire holding of 813,000 shares, government filings show. Soros Fund Management LLC raised its stake to 48,350 shares from 42,800, and Touradji Capital Management LP held 45,000 shares compared with none as of June 30, separate filings showed.

Paulson is still the biggest investor in the ETP. Spokesmen for Paulson, Touradji and Eton Park declined to comment. Michael Vachon, a spokesman for Soros, didn’t respond to a voicemail.

“Gold is definitely a store of value and still very attractive for asset managers,” said Dominic Schnider, global head of commodity research at the wealth management unit of UBS AG in Singapore. “Given the reality of the debt situation in Europe, the need to hold real assets remains a top priority.”

The euro area’s inability to contain its sovereign-debt crisis led to a surge in Italian borrowing costs as investors bet on which nation will need aid next. Monti struggled to get political parties to agree to participate in a so-called technical Cabinet during talks in Rome yesterday.

Silver for immediate delivery fell 1 percent to $33.8925 an ounce. Palladium was 1 percent lower at $657.75 an ounce. Platinum declined 0.7 percent to $1,631 an ounce.

--With assistance from Glenys Sim and Chanyaporn Chanjaroen in Singapore and Debarati Roy in New York. Editors: John Deane, Dan Weeks

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net


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