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Gold Assets in Fund Paulson Holds at Lowest in Four Years

May 08, 2013

Gold Assets in Fund Paulson Holds Drop to Lowest in Four Years

Bullion lost 13 percent this year, heading for the first annual drop since 2000, as equities rallied and some investors lost faith in gold as a store of value, cutting holdings and wiping $36.6 billion from the value of global ETPs. Photographer: Jean Chung/Bloomberg

Assets in the SPDR Gold Trust, the bullion-backed exchange-traded fund that’s held by billionaire John Paulson, dropped to the lowest level in four years as U.S. equities climbed to a record.

Holdings (GDTRGOLD) slumped 0.4 percent to 1,057.79 metric tons yesterday, the lowest since March 2009, according to data on the fund’s website. The assets fell 12 percent in April, the most since the fund was started in 2004, according to data compiled by Bloomberg. The SPDR Gold Trust is the largest bullion exchange-traded product.

Gold tumbled into a bear market in April as investors favored riskier assets on expectations the global economy was recovering. The Standard & Poor’s 500 Index rose to a record for a fourth straight day yesterday while the Dow Jones Industrial Average climbed above 15,000 for the first time on higher corporate earnings. Coutts & Co. said this week it had scaled back gold holdings and the price would probably not return to its peak.

“Investors globally are chasing yields and that why we’re seeing equities rally,” said Victor Thianpiriya, an analyst at Australia & New Zealand Banking Group Ltd. (ANZ) in Singapore. “That’s not a positive environment for gold.”

Gold for immediate delivery was little changed at $1,453.92 an ounce at 4:11 p.m. in Singapore after swinging between gains and losses. Bullion for June delivery rose 0.3 percent to $1,453.20 on the Comex after declining 1.3 percent yesterday.

Paulson’s Loss

Bullion lost 13 percent this year, heading for the first annual drop since 2000, as equities rallied and some investors lost faith in gold as a store of value, cutting holdings and wiping $36.6 billion from the value of global ETPs. Paulson, the top holder of the SPDR ETF, lost 27 percent in his Gold Fund last month after the precious metal and related securities plummeted, according to two people familiar with the matter.

Gold rebounded 10 percent from a two-year low on April 16 as coins and jewelry demand from the U.S. to China surged. Indian jewelers are paying a premium of as much as $12 an ounce from $2 before prices fell 14 percent in two sessions through April 15. Sales of gold coins by the U.S. Mint (AEBSGTOO) in April rose to the highest since December 2009, while Australia’s Perth Mint said demand jumped to a five-year high.

Paul Singer’s Elliott Management Corp., Paulson’s Paulson & Co. and Threadneedle Investments are among those sticking with bullish bets. Paulson has said gold is the best protection against currency debasement and inflation, while Elliott said it remains the best store of value and will rebound as governments haven’t found a solution to their debts.

Global Stimulus

Central banks around the world are printing unprecedented amounts of money to strengthen their economies. The Federal Reserve reiterated on May 1 that it will keep the monthly pace of bond purchases at $85 billion. European Central Bank President Mario Draghi cut the euro area’s benchmark interest rate to a record low on May 2.

Billionaire investor Warren Buffett said the metal has no appeal even after the slump. “It just sits there, and you hope somebody pays you more for it,” Buffett, the chairman and chief executive officer of Berkshire Hathaway Inc. (A:US), said May 2.

Investors pulled $10.23 billion from gold funds in the first quarter, the most since at least 2000, when the data begins, according to Cambridge, Massachusetts-based EPFR Global, which tracks money flows.

“Liquidation is continuing with the rotation out of metals and into equities,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “As long as there’s no major correction in equities, the metals will keep getting knocked down.”

Armel Leslie, a spokesman at Walek & Associates for New York-based Paulson, declined to comment on the returns. Paulson’s firm oversees about $18 billion in assets and the SPDR Gold Trust is his biggest investment.

To contact the reporters on this story: Debarati Roy in New York at droy5@bloomberg.net; Joe Richter in New York at jrichter1@bloomberg.net; Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net


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