Soros, Eton Park raised gold ETF holdings before price drop

May 16 (Bloomberg) -- Billionaire investor George Soros increased his holdings in the SPDR Gold Trust in the first quarter while John Paulson maintained his stake, the fund’s largest, before bullion prices erased gains for the year.

Soros Fund Management more than tripled its investment in the largest exchange-traded fund backed by bullion to 319,550 shares, Securities and Exchange Commission filings reflecting holdings in the three-month period showed yesterday. Eric Mindich’s Eton Park Capital also bought shares, while Paulson & Co. kept its investment at 17.3 million shares.

Gold has tumbled 8.1 percent since March 30, poised for the biggest quarterly loss since 2004, as a political impasse in Greece drove investors to buy the dollar as a haven. Reports signaling improving U.S. economic growth have damped expectations that the Federal Reserve will embark on another round of debt buying, or quantitative easing. Prices climbed 6.7 percent in the first quarter amid speculation that the Fed would take more steps to shore up expansion.

“People were more upbeat about the economy, and because of expectations of QE3, we saw money flow into riskier assets including equities, commodities and precious metals,” said Michael Gayed, the chief investment strategist in New York at Pension Partners LLC, which advises on more than $150 million in assets. “Things, of course, took a completely different turn in the past few weeks.”

Hedge-Fund holdings in SPDR gold shares fell by $190.1 million last quarter to $6.35 billion, according to data compiled by Bloomberg.

European Crisis

Bullion erased its gains this year on May 14 as a leadership vacuum in Greece prompted European officials to weigh prospects for the currency union’s first-ever departure. The metal has dropped 1.9 percent in 2012 to settle at $1,536.60 an ounce today on the Comex in New York, and has lost 20 percent since reaching a record last year.

Global holdings in ETPs backed by bullion are headed for a third straight monthly decline, the longest losing streak since 2004. Assets in the SPDR Gold Trust, the largest fund backed by bullion, peaked at 1,309.92 metric tons on Aug. 8 and were at 1,277.11 tons as of yesterday.

Vinik Asset Management, the Boston-based hedge fund founded by Jeffrey Vinik, who formerly ran the Fidelity Magellan Fund, cut its SPDR holdings by 12 percent to 2.3 million shares as of March 31, down 300,000 shares from the end of the fourth quarter, a filing showed.

Steven A. Cohen’s SAC Capital, which manages $14 billion and is based in Stamford, Connecticut, lowered holdings by 63 percent to 66,700 shares. Jonathan Gasthalter, a spokesman, declined to comment.

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