Paulson Maintains Gold Stake as Prices Touch Five-Year Low

  • Bullion prices fell to a five-year low on November 12
  • Reduces stake in AngloGold Ashanti by 1 million shares

Billionaire hedge fund manager John Paulson stuck with his holding in the biggest exchange-traded product backed by gold, looking past slumping prices for the metal.

Paulson & Co. owned 9.23 million shares of the SPDR Gold Trust at the end of the third quarter, a government filing showed Monday. That was unchanged from the three months ended in June, when the firm cut holdings for the first time in two years.

Gold prices fell to a five-year low on Nov. 12, as investors spurn the metal amid a stronger dollar and the outlook for higher U.S. interest rates. Higher rates curb the appeal of precious metals, since they doesn’t pay interest, unlike competing assets. A decline this quarter would be the sixth straight loss and the longest slump since 1984.

The billionaire started his foray into gold in early 2009, betting that prices would rise amid unprecedented monetary stimulus. Bullion climbed 70 percent from December 2008 to June 2011 as the Federal Reserve bought debt and held borrowing costs near zero percent. Prices have fallen since then as inflation failed to accelerate and the U.S. labor market improved.

“Precious metals and commodities always have a place in portfolios on a long-term basis, but there’s very little to worry about in inflation,” Oliver Pursche, who oversees $1 billion in assets as the chief executive officer of Bruderman Brothers in New York, said in a telephone interview. “So I think anyone who’s buying and holding gold at this point is really just looking at the next five to 10 years.”

Bullion Loses 4.8%

The metal is set for a third straight annual loss, the longest slump since 1998.

Paulson uses the SPDR ETF to back his funds’ gold share classes, which offer holdings denominated in bullion for investors interested in decoupling their assets from the value of the dollar. In equities, Paulson reduced its stake in AngloGold Ashanti Ltd. by 1 million shares during the quarter, the filing shows.

Armel Leslie, a spokesman of New York-based Paulson & Co. with Peppercomm, declined to comment in an e-mail.

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