Bloomberg News

Soros, Eton Park Raised Gold ETP Holdings Before Price Drop

May 16, 2012

Soros Fund Management LLC Founder George Soros. Photographer: Simon Dawson/Bloomberg

Soros Fund Management LLC Founder George Soros. Photographer: Simon Dawson/Bloomberg

Billionaire investor George Soros increased his holdings in the SPDR Gold Trust in the first quarter while John Paulson maintained his stake, the fund’s largest, before bullion prices erased gains for the year.

Soros Fund Management more than tripled its investment in the largest exchange-traded fund (GLD:US) backed by bullion to 319,550 shares, Securities and Exchange Commission filings reflecting holdings in the three-month period showed yesterday. Eric Mindich’s Eton Park Capital also bought shares, while Paulson & Co. kept its investment at 17.3 million shares.

Gold has tumbled 8.1 percent since March 30, poised for the biggest quarterly loss since 2004, as a political impasse in Greece drove investors to buy the dollar as a haven. Reports signaling improving U.S. economic growth have damped expectations that the Federal Reserve will embark on another round of debt buying, or quantitative easing. Prices climbed 6.7 percent in the first quarter amid speculation that the Fed would take more steps to shore up expansion.

“People were more upbeat about the economy, and because of expectations of QE3, we saw money flow into riskier assets including equities, commodities and precious metals,” said Michael Gayed, the chief investment strategist in New York at Pension Partners LLC, which advises on more than $150 million in assets. “Things, of course, took a completely different turn in the past few weeks.”

Hedge-Fund holdings in SPDR gold shares (GLD:US) fell by $190.1 million last quarter to $6.35 billion, according to data compiled by Bloomberg.

European Crisis

Bullion erased its gains this year on May 14 as a leadership vacuum in Greece prompted European officials to weigh prospects for the currency union’s first-ever departure. The metal has dropped 1.9 percent in 2012 to settle at $1,536.60 an ounce today on the Comex in New York, and has lost 20 percent since reaching a record last year.

Global holdings in ETPs backed by bullion are headed for a third straight monthly decline, the longest losing streak since 2004. Assets in the SPDR Gold Trust, the largest fund backed by bullion, peaked at 1,309.92 metric tons on Aug. 8 and were at 1,277.11 tons as of yesterday.

Vinik Asset Management, the Boston-based hedge fund founded by Jeffrey Vinik, who formerly ran the Fidelity Magellan Fund (FMAGX:US), cut its SPDR holdings by 12 percent to 2.3 million shares as of March 31, down 300,000 shares from the end of the fourth quarter, a filing showed.

Steven A. Cohen’s SAC Capital, which manages $14 billion and is based in Stamford, Connecticut, lowered holdings by 63 percent to 66,700 shares. Jonathan Gasthalter, a spokesman, declined to comment.

Eton Park

Mindich’s Eton Park bought 739,117 shares in the SPDR Gold Trust during the first quarter. The New York-based fund held no shares of the exchange-traded product as of Dec. 31. Gasthalter, also a spokesman for Eton Park, declined to comment.

Paulson, 56, who became a billionaire in 2007 by betting against the U.S. subprime mortgage market, told clients in February that gold is his best long-term bet, serving as protection against currency debasement, rising inflation and a possible breakup of the euro.

Armel Leslie, a Paulson spokesman, didn’t respond to a voicemail for comment, and neither did Michael Vachon, a spokesman for Soros.

Prices rallied for 11 consecutive years to 2011, gaining more than sevenfold, as investors snapped up the metal after government and central bank stimulus programs boosted speculation that inflation would accelerate.

Central Banks

Last year, central banks added 439.7 tons, the most in almost five decades. They may buy a similar amount this year, the London-based World Gold Council estimates. Global holdings in ETPs at 2,379.4 tons, are still within 1.3 percent of the March 13 record, according to Bloomberg data.

“Because of all the economic problems there will be more easing around the world and that will stoke inflation and people will flock back to gold,” Paul Dietrich, chief executive officer of Foxhall Capital Management Inc., said in a telephone interview from Alexandria, Virginia. “I would not be surprised if gold starts racing and touches its peak either at the end of this year, or maybe in 2013.”

Money managers who oversee more than $100 million in equities must file a Form 13F with the SEC within 45 days of each quarter’s end to show their U.S.-listed stocks, options and convertible bonds. The filings don’t show non-U.S. securities or how much cash the firms hold.

To contact the reporter on this story: Debarati Roy in New York at droy5@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net


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Companies Mentioned

  • GLD
    (SPDR Gold Shares)
    • $125.62 USD
    • -0.12
    • -0.1%
  • FMAGX
    (Fidelity Magellan Fund)
    • $93.37 USD
    • 0.45
    • 0.48%
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