(Reuters) - Hedge fund Paulson & Co maintained its stake in the world's
biggest gold-backed exchange-traded fund, SPDR Gold Trust, in the second
quarter, while Soros Fund Management LLC sharply boosted his investment in
gold mining stocks.
Legendary investor George Soros nearly doubled his ownership in a U.S. gold
mining companies ETF and initiated new stakes in other gold producers,
suggesting the big names in hedge funds continued to have confidence in the
yellow metal.
Investors pay close attention to the quarterly filings by notable fund
managers because they provide the best insight into whether the so-called
smart money has changed its sentiment toward gold as a hedge against
inflation and economic uncertainty.
New York-based Paulson & Co, led by longtime gold bull John Paulson, owned
around 10.2 million shares in the ETF worth $1.31 billion on June 30, a
filing with the U.S. Securities and Exchange Commission showed on Thursday.
That represents a gain of around $45.3 million as the price of gold climbed
nearly 3.5 percent in the second quarter. In the first quarter, gold posted
a gain of 6.5 percent as funds added gold back to their portfolios after
aggressively selling the yellow metal last year.
"It shows that the premier players in investing still have faith in gold,"
said Bill O'Neill, partner at commodities investment firm LOGIC Advisors in
New Jersey.
Some gold investors, however, are increasingly cautious as an improving U.S.
outlook could prompt the Federal Reserve to raise interest rates soon.
Market watchers said gold's outlook remains bullish as long as real interest
rates, calculated by deducting inflation rates from nominal interest rates,
stay negative.
"Gold has become increasingly attractive to hedge fund managers who are long
-term investors as real interest rates remain negative," said Axel Merk,
chief investment officer of the $400 million Merk Funds, a family of
currency mutual funds and the Merk Gold Trust, a gold ETF.
FUNDS BUY GOLD MINING STOCKS
Soros Fund Management increased his stake in Market Vectors Gold Miners ETF
to 2.05 million shares valued at $54 million at the end of the second
quarter, compared with 1.16 million shares in the first quarter.
"Gold mining stocks are considered relatively cheap. It also suggests that
Soros may be thinking gold prices are near the bottom of the range," O'Neill
said.
Soros also initiated new gold investments including 1.33 million shares in
call options of the Gold Miners ETF valued at $35 million, and 1 million
equity shares in Allied Nevada Gold Corp.
But Soros also slashed his stake in Barrick Gold Corp by more than 90
percent to less than half a million shares valued at just $8.8 million in
the second quarter after boosting ownership of the gold miner in the first
quarter.
