What Are These 3 Hedge Funds Doing With Gold?

Late Monday, several well-known institutional investors filed their required 13-F forms.  The form provides investors with a glimpse at the holdings of Wall Street’s biggest funds.  While investors do not know the trading strategy used by the big boys, the 13-F form can provide insight to how successful investors think.  Investors should keep in mind that this is backward looking information that may have changed since the end of the third quarter.

These 3 hedge funds made noticeable gold moves in the third quarter:

John Paulson is the founder and President of Paulson & Co., a New York-based hedge fund.  He is known as making the greatest trade ever, a bet against the housing bubble.  More recently, he has been known for his bullish stance on gold.  According to his latest 13-F filing, Paulson & Co. reduced its massive SPDR Gold Trust ETF (NYSEARCA:GLD) position from 31.5 million shares to just under 20.3 million shares, representing a 36% decrease.  Although this large change may reflect a sentiment shift, many believe that Paulson liquidated GLD due to fund redemptions.  Paulson’s assets under management fell from $29 billion to $20.7 billion in the third quarter.

David Einhorn, the head of Greenlight Capital, made waves recently by shorting Green Mountain Coffee Roasters and disclosing a larger long position in the Market Vectors Gold Miners ETF (NYSEARCA:GDX).  Now, we have more details about Einhorn’s gold investments in the third quarter.  The billionaire investor added a new stake in Barrick Gold Corp. (NYSE:ABX) of 1.35 million shares, while also adding a new stake of 1.9 million shares in the Market Vectors Jr. Gold Miners ETF (NYSEARCA:GDXJ).  Mr. Einhorn more than doubled his Market Vectors Gold Miners ETF position from 3.5 million shares to nearly 7.3 million shares.  As of September 30, 2011, funds run by Mr. Einhorn were valued at $4.6 billion.  In percentage terms, Apple was the largest position of his portfolio, while the Market Vectors Gold Miners ETF was the second largest.  In his Q3 letter to shareholders, Einhorn explains, “While the price of gold has advanced significantly, the shares of gold miners have not.  It has reached the point where gold mining stock should do well even in a stable gold market; we expect the price of gold to appreciate further, so gold miners should do even better.”

Investor Insights: Here’s Why Goldman is Staying Long Gold

Dan Loeb is the manager and founder of Third Point LLC, a New York-based hedge fund.  In the third quarter, assets under management dropped from $2.7 billion to $2.1 billion.  Mr. Loeb raised his stakes in Barrick Gold (NYSE:ABX) from 1.85 million shares to almost 2.3 million shares.  He decreased his holds of the SPDR Gold Trust ETF slightly from 285k to 260k shares.  Mr. Loeb also completely liquidated his 1.65 million share position of Freeport-McMoRan Copper & Gold (NYSE:FCX) in the third quarter.

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