SPDR Gold Holdings Slump Below 1,000 Tons on Fed OutlookDebarati Roy and Glenys Sim
Holdings in the SPDR Gold Trust, the world’s largest exchange-traded product backed by the metal, fell below 1,000 metric tons for the first time in four years, erasing more than $29 billion from the fund’s value this year.
In 2013, the assets have slumped 351.3 tons, or 26 percent, to 999.56 tons, the lowest since February 2009, according to data compiled by Bloomberg. Holdings reached a record 1,353.35 tons in December. Billionaire John Paulson is the biggest investor in the fund.
Today, gold futures fell to a four-week low after Federal Reserve Chairman Ben S. Bernanke said the central bank may “moderate” the pace of U.S. bond purchases later this year. In 2013, the metal has dropped 18 percent, slumping into a bear market in April, as some investors lost faith in the commodity as a store of value amid low inflation and a global equity rally.
“Inflation remains at a low pace and the easing may end, so there are no real solid reasons to back gold,” Edward Lashinski, the Chicago-based director of global strategy for futures trading at RBC Capital Markets LLC, said in a telephone interview.
This year, the MSCI All-Country World Index of equities has climbed 6.9 percent, and the dollar gained 2 percent against a basket of major currencies.
U.S. government filings in May showed billionaire investor George Soros joined funds run by Northern Trust Corp. and BlackRock Inc. in cutting holdings in SPDR assets in the first quarter. Paulson kept his stake of 21.8 million shares.
Paulson posted a 13 percent decline in his Gold Fund last month, according to a letter to investors. The drop brings losses in the strategy to 54 percent since the start of the year, the firm said in the letter, a copy of which was obtained by Bloomberg News.
The Gold Fund is the smallest strategy of the $19 billion money manager, with about $360 million, or 2 percent of assets, most of it Paulson’s own money.
Today, gold futures for August delivery rose 0.5 percent to settle at $1,374 an ounce on the Comex in New York. After the close, the price touched $1,348.30 in electronic trading, the lowest for a most-active contract since May 20.
Bernanke made his comments at a press conference after the settlement and the release of a statement by Federal Open Market Committee following a two-day meeting. The Fed currently buys $85 billion in Treasury and mortgage debt each month.
As of yesterday, holdings in global ETPs backed by gold tumbled 517.4 tons, or 20 percent, to 2,114.6 tons, the lowest since March 2011, data compiled by Bloomberg show.
“The ETF size and the outflows from the ETF market have a disproportionate effect on the sentiment of the market because of their extreme visibility,” Mark Keenan, an analyst at Societe Generale SA, said this week on Bloomberg Television’s “First Up” with Zeb Eckert. “We see ultimately about 800 tons coming out of the ETFs for this year.”
This year’s gold slump follows 12 straight annual gains. The metal has surged 55 percent since the end of 2008, reaching an all-time high of $1,923.70 in September 2011, as the Fed cut borrowing costs to a record to bolster the economy.