Yesterday, Standard & Poor’s downgraded the long-term outlook of U.S. debt from stable to negative. European Central Bank is expected to increase interest rates even though Southern European countries are struggling. There are doubts about United States’ credit rating and the US dollar is declining. Fed’s loose monetary policy is supporting inflation expectations. Several prominent hedge fund managers like Jim Rogers, Julian Robertson, and Ray Dalio expressed their concerns about the US dollar. As a result, investors and hedge funds are flocking into gold, oil, metals and other hard assets that can retain their value in an inflationary environment. The demand from high growing emerging market countries also put a floor under these commodities.
Finally today gold futures crossed the $1500 level. We are also bullish about the gold and believe than investors should consider hedging inflation risks by gaining some exposure to gold. Hedge funds follow various strategies to benefit from increase in gold prices. Hedge fund managers such as David Einhorn bought physical gold. George Soros, Dan Loeb and Stephen Mandel prefer Gold ETF (GLD). John Griffin, Roberto Mignone, Brevan Howard, and Curtis Schenker like Gold Miners ETF (GDX). Other hedge fund managers invested directly in gold mining stocks.
Insider Monkey, your source for free insider trading data, summarized hedge fund holdings in top gold miners. We follow 175 hedge funds. Here are the top gold producers that hedge funds have and prominent investors invested in at the end of 2010:
Company | Ticker | Holdings (x1000) | No. of Funds |
AngloGold Ashanti Ltd | 2,028,209 | 6 | |
Kinross Gold Corp | 494,047 | 10 | |
Gold Fields Ltd | 486,190 | 5 | |
PAN American Silver Corp | 443,951 | 9 | |
Newmont Mining Corp | 346,226 | 20 | |
Agnico-Eagle Mines Ltd | 304,567 | 8 | |
Barrick Gold Corp | 302,704 | 19 | |
Silver Standard Resources Inc | 289,710 | 3 | |
Allied Nevada Gold Corp | 194,739 | 6 | |
Seabridge Gold Inc | 181,567 | 2 | |
Goldcorp Inc | 165,037 | 12 | |
Silver Wheaton Corp | 130,471 | 7 | |
IAMGOLD Corp | 127,572 | 9 | |
Gammon Gold Inc | 118,762 | 4 | |
Randgold Resources Ltd | 110,820 | 5 | |
Yamana Gold Inc | 93,641 | 10 | |
Hecla Mining Co | 88,462 | 7 | |
Great Basin Gold Ltd | 69,395 | 6 | |
Eldorado Gold Corp | 61,815 | 4 | |
New Gold Inc | 52,595 | 5 | |
Northgate Minerals Corp | 42,293 | 4 | |
Aurizon Mines Ltd | 29,414 | 3 | |
Royal Gold Inc | 24,529 | 4 | |
Cia de Minas Buenaventura SA | 24,045 | 5 | |
Minefinders Corp | 23,498 | 3 | |
Tanzanian Royalty Exploration Corp | TRE | 21,508 | 1 |
Nevsun Resources Ltd | 13,498 | 2 | |
Golden Star Resources Ltd | 7,986 | 3 | |
Harmony Gold Mining Co Ltd | 648 | 1 | |
Gold Resource Corp | 308 | 1 |
John Paulson is the most bullish hedge fund manager about gold since 2009. One of his largest investments in gold is AngloGold Ashanti. He has more than $2 billion invested in AU. Kinross Gold Corp ranks second with 10 hedge funds owning nearly $500 million in KGC at the end of December. John Paulson, George Soros, and Libra Advisors’ Ranjan Tandon are among the hedge funds with KGC positions.
Newmont Mining is the most popular gold miner in terms of the number of hedge funds invested in. There were 20 hedge funds with NEM holdings. Barrick Gold (ABX) ranked second with 19 different prominent institutional investors. Eric Mindich’s Eton Park had large positions in both stocks. Jim Simons’ Renaissance preferred NEM, whereas Richard Chilton was the largest investor in ABX.
We believe gold miners provide a leveraged exposure to gold. These stocks should perform better than gold bullion if prices keep rising. On the other hand they perform worse than gold bullion in bear markets.
Disclosure: I am long physical gold
