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What Paulson, Soros & Einhorn et al are telling us about the gold market

Some of the most powerful US funds have shifted their allocations in gold, but drawing conclusions from it remains as difficult as ever.

John Paulson, George Soros and David Einhorn (of Greenlight Capital) are some of the most influential investors in gold. In fact such is their status that their predictions can become self-fulfilling.

News out this week that Paulson shed a third of his gold ETF holdings in September from his $30bn fund is surely cause for concern, particularly given that, notwithstanding the sale, he still remains the largest holder of the SPDR Gold Trust (GLD). Paulson has an enviable record and where he leads, others follow. It remains unclear however whether this is a fundamental shift in investment strategy, or whether it is a case of needing to take profit in bullion to cover losses in other asset classes, or whether it is a shift from the ETF into physical bars (to reduce costs) which of course would be price neutral. Paulson bought 31.5 million gold ETF shares back in Q1 2009 in which time the value has increased from £2.84b to $5.3b.

George Soros has been more transparent in his views, and described gold as being “in a bubble” early last year. However he held on nearly a year before selling 99% of his bullion position in the first quarter 2011 which was well before the all time high seen in September this year. At the time he said he expected mining shares to benefit as the precious metals rally petered out… something that David Einhorn seems to have heeded.

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Posted by on Nov 20 2011. Filed under Gold stocks. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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