Billionaire investor George Soros joined Northern Trust Corp and BlackRock Inc in cutting holdings of exchange-traded products backed by gold before a bear market in prices last month, while John Paulson maintained a stake that lost about US$165 million in the first quarter.
Soros Fund Management LLC lowered its investment in the SPDR Gold Trust, the biggest such fund, by 12 percent to 530,900 shares as of March 31, compared with three months earlier, a US Securities and Exchange Commission filing showed on Wednesday.
Funds run by Northern Trust and BlackRock showed reductions of more than half, earlier filings showed. Paulson & Co, the largest investor in SPDR, held 21.8 million shares, while Schroder Investment Management Group bought 2.1 million.
Gold prices that reached a record in 2011 tumbled into a bear market last month, erasing US$42 billion from the value of exchange-traded product assets this year, data compiled by Bloomberg show. Some investors lost faith in the metal as a store of value, favoring riskier assets, as equities soared to all-time highs and unprecedented stimulus measures by the world’s central banks failed to spur inflation. After the longest rally in nine decades, gold is headed for its first annual decline since 2000.
“It’s a very nasty time for gold investors as prices are dropping while stocks keep raging ahead,” Michael Gayed, co-portfolio manager of the ATAC Inflation Rotation Fund at Pension Partners LLC, which advises on about US$270 million in assets, said in a telephone interview. “The emotional double whammy has accentuated the selling.”
Gold futures tumbled 17 percent to US$1,387.40 an ounce on the COMEX in New York this year, while the Standard & Poor’s GSCI Spot Index of 24 raw materials dropped 3.5 percent and the MSCI All-Country World Index of equities gained 11 percent.
Soros Fund Management’s first-quarter reduction in SPDR holdings followed a 55 percent cut in the final three months of last year, an earlier filing showed. Gold has ceased to be a haven after the metal fell when the euro was close to collapse last year, Soros said in an interview with the South China Morning Post posted on the newspaper’s Web site on April 8.
Global exchange-traded product holdings have tumbled 16 percent this year after rising every year since the first product was listed in 2003, according to data compiled by Bloomberg. Assets in SPDR have plunged 22 percent and will probably drop by an additional 2 million to 4 million ounces after slumping 9.7 million ounces since mid-December last year, Deutsche Bank AG said in a report on Tuesday.
While the sell-off has been faster than expected, a further drop in exchange-traded product holdings will probably mean more price declines, Goldman Sachs Group Inc analysts, including Jeffrey Currie, wrote in a report dated Tuesday.
Northern Trust cut its SPDR stake by 57 percent to 6.9 million shares, a filing on May 1 showed.