Are Hedge Funds Still Interested in Gold?

Greenlight Capital’s David Einhorn recently wrote a piece criticizing the mass printing and bond buying by central banks around the world, relating it to an American Express card that eventual hits a limit. Einhorn explains, “This buying binge brings to mind American Express cards, which are famous for their promise of no pre-set spending limits. But as some AmEx customers have learned, there is a spending limit – they just don’t tell you what it is. AmEx anticipates how much you can repay based on your annual income and your payment history. When your charges exceed their estimates, they cut you off until you pay off your balance.” He continues, “Central bankers should keep this dynamic in mind, as they continue to run their printing presses. While the ink may be endless, the market’s tolerance is not (though there is no sign that it is nearly exhausted).”

Naturally, Einhorn is a fan of gold. While it is unknown how large of a physical bullion position Einhorn holds, he did maintain his positions in Barrick Gold and the Market Vectors Gold Miners Index ETF. As of the end of September, his stake in Barrick Gold, the world’s largest gold producer, is valued at $82.2 million. Meanwhile, his Miners ETF position is worth about $322.5 million.

Although many investment firms maintained or increased their exposure to gold names in the third quarter, Third Point, the hedge fund founded by Daniel S. Loeb, reduced its stake in the SPDR Gold Trust to 130,000 shares, compared to 145,000 shares in the second quarter. This comes after the firm completely sold out of its Barrick Gold position in the previous quarter.

Steve Cohen’s SAC Capital Advisors LP made several moves with gold miners. The hedge fund increased its stake in Yamana Gold nearly fivefold to 370,496 shares, compared to 75,826 shares in the second quarter. It also increased its stake in Eldorado Gold to 74,654 shares, compared to 53,671 shares in the previous quarter. Positions in Barrick Gold, Goldcorp and AngloGold Ashanti were all reduced, while the Gold Fields stake remained unchanged.

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Disclosure: Long EXK, AG, HL, PHYS