Soros Sells Most of Gold ETP Holdings During First Quarter

Billionaire investor George Soros sold most of his holdings in the bullion-backed SPDR Gold Trust and iShares Gold Trust (IAU) funds in the first quarter and bought shares of mining companies Goldcorp Inc. and Freeport-McMoRan Copper & Gold Inc. (FCX), a government filing shows.

Soros Fund Management LLC held 49,400 shares of SPDR Gold Trust as of March 31, compared with 4.721 million at the end of the fourth quarter, the filing today with the U.S. Securities and Exchange Commission showed. The New York-based fund sold all 5 million shares it held in iShares Gold Trust. Soros bought 301,300 shares of Freeport-McMoRan and 7,600 shares of Goldcorp.

The decade-long surge in gold attracted investors seeking better returns than equities or bonds and an alternative to currencies, helping boost holdings in exchange-traded products backed by bullion to a record in December. Accelerating inflation, Europe’s debt crisis, a weakening dollar and fighting in Libya boosted the spot price of the metal to an all-time high of $1,577.57 an ounce on May 2. ETP holdings have slipped 3.6 percent from the peak.

“While backward looking, it is the best available indicator of investors’ precious-metals exposure,” Edel Tully, an analyst at UBS AG in London, said on May 9.

Michael Vachon, a spokesman for Soros, declined to comment on the sale. Soros Fund Management manages about $28 billion.

Investors in 10 gold-backed exchange-traded products owned 2,041 metric tons of metal as of May 13 valued at $98 billion with gold at $1,493.60, according to Bloomberg calculations. Gold futures settled today at $1,490.60 in New York.

‘Asset Bubble’

Soros described gold in January last year as “the ultimate asset bubble.” In a Nov. 15 speech, the 80-year-old investor said that conditions for the metal to keep rising were “pretty ideal,” and in January this year, he said the boom in commodities may last “a couple of years” longer.

“As the precious metals rally ends, you’ll get transition toward related equities,” said James Dailey, who manages about $200 million at TEAM Financial Asset Management LLC in Harrisburg, Pennsylvania. “You don’t see any speculative appetite for gold stocks yet.”

The Philadelphia Stock Exchange Gold and Silver Index has dropped 14 percent this year. Gold futures have climbed 4.9 percent.

Investor demand for precious metals accelerated after the collapse of Lehman Brothers Holdings Inc. in September 2008 and as governments and central banks pumped trillions of dollars into the world financial system.

Fed Policy

The Federal Reserve has held interest rates close to zero percent since December 2008. Chairman Ben S. Bernanke has said he’s in no hurry to raise borrowing costs and that he will keep reinvesting proceeds of maturing debt held by the central bank in bonds.

The European Central Bank last month raised rates for the first time in almost three years to cool accelerating consumer prices. President Jean-Claude Trichet said May 9 that the world’s central bankers are united in fighting inflation. Some investors buy bullion as an inflation hedge, while higher interest rates increase the opportunity cost of holding the non- interest-bearing metal.

Paulson & Co., the U.S. hedge fund run by John Paulson, maintained 31.55 million shares in the SPDR Gold Trust, a filing showed today.

‘Switched Exposure’

In the first quarter, gold ETP holdings declined 3.3 percent, the first decline in a year. Silver holdings rose 1.9 percent, palladium assets fell 1 percent, and platinum holdings gained 12 percent.

“Some of the ETF liquidation in the quarter was not actually outright gold selling,” UBS’s Tully said. “In some cases, investors switched their gold exposure from ETP-based to allocated, and so this somewhat distorts the ETP ownership picture.”

Eric Mindich’s Eton Park Capital Management LP reduced its stake in the SPDR Gold Trust by 48 percent during the first quarter, according to a government filing. Eton sold 2.165 million shares, cutting its holdings to 2.328 million, according to an SEC filing.

Touradji Capital Management LP, founded by Paul Touradji, sold all of its assets in the SPDR Gold Trust in the first quarter. The fund had 173,000 shares at the end of the fourth quarter. Touradji also reduced its holdings of Barrick Gold Corp. (ABX), the world’s largest producer.

Money managers who oversee more than $100 million in equities must file a Form 13F with the SEC within 45 days of each quarter’s end to show their U.S.-listed stocks, options and convertible bonds. The filings don’t show non-U.S. securities or how much cash the firms hold.

ETPs trade on exchanges with each share representing metal held in a vault.

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.

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