Billionaire hedge fund manager John Paulson, who backed away from his bullish bet on gold last year, kept his holdings of the metal unchanged in the fourth quarter as prices capped the biggest annual drop since 1981.
Paulson & Co., the largest investor in the SPDR Gold Trust, the biggest exchange-traded product backed by the metal, held 10.23 million shares as of Dec. 31, unchanged from Sept. 30, a government filing showed yesterday. Paulson & Co., which manages about $21 billion, has kept its stake intact since cutting by half in the three months ended June 30.
Gold tumbled 28 percent last year as equities surged and inflation remained muted. Paulson, 58, started his foray into gold in early 2009, betting that prices would rise amid unprecedented monetary stimulus. His tone changed last year, telling clients in November that he personally wouldn’t invest more money in his bullion fund. While prices have rebounded 9.7 percent this year, they’re still 31 percent below the record $1,923.70 an ounce reached in September 2011.
“The equity market was the start performer, and we saw most momentum players ditch gold,” said Jeff Sica, who helps oversee more than $1 billion of assets as president of Sica Wealth Management in Morristown, New Jersey. “While this year we have seen some repair in prices, people need to see a meaningful increase for the tide to change.”
In the three months ended Dec. 31, gold prices fell 9.4 percent, helping to wipe $14.1 billion from the value of global ETPs backed by bullion as investors reduced their holdings by 166.4 metric tons, a fourth straight quarterly decline. Billionaire George Soros sold his entire stake in the SPDR Gold Trust in the second quarter, according to a government filing.
The drop in prices took its toll on mining companies. Barrick Gold Corp., the world’s largest producer, took $2.82 billion of writedowns in the fourth quarter, bringing the total in 2013 to $11.5 billion. Goldcorp Inc., the second-largest, reported $443 million of impairments. The Market Vectors Gold Miners ETF fell 16 percent in the three month ended Dec. 31.
Paulson maintained his stake in Agnico Eagle Mines Ltd. and cut his stake in AngloGold Ashanti Ltd.’s American depositary receipts, the filing shows. Soros Fund Management LLC acquired 6.3 million shares of Barrick in the fourth quarter, according to a separate filing.
Armel Leslie, a spokesman for Paulson & Co. who works for WalekPeppercomm, declined to comment on the filing. Michael Vachon, a spokesman for Soros, declined to comment on the firm’s holdings.
Prices reached a six-month low in December, increasing demand for coins, bars and jewelry, mostly in China and India. Sales of American Eagle gold coins by the U.S. Mint rose 63 percent in January to the highest since April. Futures in New York climbed for eight straight days through yesterday, the longest stretch of gains since July 2011.
Gold’s rally has been driven in part by “very, very strong” physical demand, Greg Robinson, chief executive officer of Newcrest Mining Ltd., Australia’s biggest producer, said yesterday on a media call. Barrick CEO Jamie Sokalsky said Feb. 13 he is more optimistic prices have bottomed amid reports of Chinese demand and slowing ETP sales.
Holdings in the SPDR Gold Trust rose to 806.35 tons as of Feb. 13, the highest since Dec. 20, before dropping 0.6 percent to 801.25 tons yesterday. Investors have returned to the metal amid signs of sputtering U.S. economic growth. Domestic retail sales fell in January by the most since June 2012, and jobless claims unexpectedly rose last week, government data showed. Federal Reserve Chairman Janet Yellen said on Feb. 11 that the recovery in the labor market is “far from complete.”
Gold surged more than 500 percent during 12 straight years of gains through 2012 as the dollar weakened. The rally accelerated from December 2008 to June 2011 as the Fed expanded its balance sheet through debt purchases and held borrowing costs at a record low to revive growth amid a U.S. recession.
This year’s rebound hasn’t deterred analysts at Goldman Sachs Group Inc., who on Feb. 12 restated a forecast for lower prices. The metal will drop to $1,050 by the end of the year, analysts led by Jeffrey Currie said in a report, citing expectations for improving U.S. growth. Barclays Plc sees prices averaging $1,150 in the second quarter and expects the rally to “flounder,” the bank said in a report yesterday.
The Fed cut monthly bond buying by $10 billion at each of its past two meetings, leaving purchases at $65 billion. Yellen said Feb. 11 that cuts aren’t on a “pre-set course.”
“The long-term players will hold on to their gold, as such kind of money printing will lead to inflationary pressure in the long run,” said John Kinsey, who helps manage about C$1 billion ($935 million) at Caldwell Securities Ltd. in Toronto. “In the short term, we cannot expect prices to surge as the investment demand is still low.”