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 $165 million in the first quarter.
Soros Fund Management LLC lowered its investment in the SPDR Gold Trust, the biggest such fund, by 12% to 530,900 shares as of March 31, compared with three months earlier, a Securities and Exchange Commission filing showed yesterday. Funds run by Northern Trust and BlackRock showed reductions of more than half, according to earlier filings. 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 $42 billion from the value of ETP assets this year, according to data compiled by Bloomberg. 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, the co-portfolio manager of ATAC Inflation Rotation Fund at New York-based Pension Partners LLC, which advises on about $270 million in assets, said in a telephone interview. “The emotional double whammy has accentuated the selling.”
Gold futures tumbled 18% to $1,372.60 an ounce on the Comex in New York this year as the Standard & Poor’s GSCI Spot Index of 24 raw materials dropped 3.5% and the MSCI All-Country World Index of equities gained 11%. A Bank of America Corp. index shows Treasuries dropped 0.3%.
Soros Fund Management’s first-quarter reduction in SPDR holdings followed a 55% 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 website on April 8.
Global ETP holdings have tumbled 16% in 2013 after rising every year since the first product was listed in 2003, according to data compiled by Bloomberg. Assets in SPDR have plunged 22%, and they will probably drop by an additional 2 million to 4 million ounces after slumping 9.7 million ounces since mid-December, Deutsche Bank AG said in a report on May 14.