Cross Currency Table
Gold has fallen 0.6% in U.S. dollars to $1,768/oz but is flat in the beleaguered euro at €1,306/oz. Volatility and sell offs in equity and European bond markets appears to be contributing to gold’s failure to rise through the $1,800 level. Europe's ability to tackle its growing debt crisis is in serious doubt which is leading to renewed risk off sentiment and short term gold weakness.
Gold will be supported by its proven safe haven status, but is prone to short term weakness due to sell offs in the wider financial markets. Sentiment remains very fragile which will lead to continuing safe haven demand which shall support gold in the medium and long term. Especially as the official policy response is inflation and the currency debasement.
The gold ETF GLD SEC filings were released overnight and make for interesting reading.
Known Gold Holdings by Exchange Traded Funds/ Trusts Worldwide
Paulson & Co., the hedge fund founded by billionaire John Paulson, cut its stake in the SPDR Gold Trust to 20.3 million shares in the third quarter from 31.5 million as of June 30. The firm remained the largest holder.
Paulson & Co. sold a third of their SPDR holding which is quite a large liquidation. However, Paulson remains bullish on gold as was seen in positive comments he made recently so it would seem likely that this sale may have been an effort to raise cash after his fund suffered sharp losses in the last quarter. Some hedge funds sold the ETF to cover losses during a rout that erased $7.8 trillion from the value of global equities since May.
Given Paulson’s expressed bullishness on gold, his fund may have opted for allocated accounts as was done by David Einhorn.
The SEC filings also show that billionaire investor George Soros increased his stake in the SPDR Gold Trust. Soros’ gold ETF sale was latched onto by gold bears and some advisers to warn that gold was a risky bubble.
Soros Fund Management LLC held 48,350 in the SPDR Gold Trust as of Sept. 30, compared with 42,800 shares at the end of the second quarter.
The increase in Soros gold holdings are meager at some $10 million worth but suggest that Soros is not as bearish on gold as the multitude of news headlines, regarding his comments regarding gold being “the ultimate asset bubble”, would suggest.
Soros added 145,000 call options and 120,000 puts in SPDR Gold in the third quarter. This confirms that Soros is not as bearish on gold as some would have U.S. believe.
There is also the real possibility that Soros’ fund, like other hedge funds, may have opted to own allocated bullion rather than a gold trust. Some hedge funds have opted for allocated gold bullion due to it being more discreet with a lack of disclosure (no quarterly filings), due to the lower long term costs and due to allocated accounts having less counter party risk than a trust with many indemnifications.
Steven Cohen’s SAC Capital Advisors LP and New York- based Touradji Capital Management LP established gold positions in the third quarter. SAC Capital, which manages $14 billion and is based in Stamford, Connecticut, held 184,601 shares in the SPDR Gold Trust as of Sept. 30. Paul Touradji had 45,000 shares compared with none on June 30, the filings show.
Total holdings in exchange-traded products backed by gold reached a record 2,330 metric tons on Aug. 18 and stood at 2,312.3 tons yesterday.
Many hedge funds are likely increasing allocations to gold but are opting to do it through safer means, such as allocated accounts, rather than the gold trusts.
This has important implications for the gold market as it means that some of the allocations of the massively powerful hedge fund industry to gold may not be realized or accounted for.
The Paulson redemptions also show up the ridiculous notion that selling by any one individual or institution, no matter how large or wealthy, could bring an end to gold’s bull market today.
In other gold news, Venezuelan Central Bank President Nelson Merentes said his country will receive its first gold shipment within 15 days as part of President Hugo Chavez’s decision to repatriate its gold reserves held abroad.
“Tomorrow we sign the contract and we’ll have the first shipment of our gold in the country within 15 days,” Merentes said at an event with Chavez broadcast on state television.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.