John Paulson, hedge fund manager and long-time gold (NYSEARCA:GLD) bull, cut ETF bullion holdings by a third in the third quarter. His move is definitely attention grabbing, but most likely not an indicator he is ditching his upbeat view of the metal.
A U.S. regulatory filing on Monday showed Paulson & Co. cut its holding in the SPDR Gold Trust (NYSEARCA:GLD) from 31.5 million to 20.3 million shares at the end of the second quarter. The sale is equal to about 1.1 million ounces of gold and worth $1.94 billion based on current prices.
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After financier George Soros liquidated almost his entire $800 million stake in gold earlier this year, Paulson held on to his large bullion investments. Soros had called gold “the ultimate bubble”, getting rid of it before the metal ran up to $1920.30, a peak record.
ANZ Research said in a note “The filing to the U.S. regulators will likely grab headlines and draw out the bullion bears, pointing to this as another sign that gold has had its day. We doubt Paulson’s gold fever has run its course.”
Analysts aren’t sure what motivated Paulson’s to sell, but they think he might be transferring positions from SPDR Gold Trust (NYSEARCA:GLD) to other holdings to better shield his positions or cut management fees charged by the SPDR. UBS analyst Edel Tully said in a note, “Redemptions from ETFs don’t always mean the outright liquidation of gold positions: in the past some investors have chosen to move to less-transparent ETFs or other types of gold exposure.”
Paulson’s sales in the SPDR have been more than offset by purchases by other investors. Overall holdings in the SPDR Gold Trust (NYSEARCA:GLD) are up almost 3 percent so far in the fourth quarter, with a 2 percent rise in the third quarter.
Paulson’s gold liquidation could also be connected to fund redemptions. By the end of September, Paulson’s Advantage Plus fund lost almost half of its value following large drops in some of its equity holdings such as Bank of America and Hewlett Packard. Paulson said earlier this month, redemption requests equaled about 8 percent of the firm’s total assets which is estimated to be about $30 billion.