Gold demand fell 13% to the lowest in three years in the first quarter as record ETP sales outweighed an increase in buying from China and India, the London-based World Gold Council said in a report yesterday. A further drop in ETP holdings will probably mean lower prices, Goldman Sachs Group Inc. analyst Jeffrey Currie wrote in a report dated May 14.
Soros Fund Management LLC cut its stake in the SPDR Gold Trust, the biggest gold ETP, by 12% to 530,900 shares now valued at about $71.1 million in the first quarter, a Securities and Exchange Commission filing showed May 15. The 82-year-old reduced his holding by 55% in the fourth quarter. Funds run by Northern Trust Corp. and BlackRock Inc. cut their stakes by more than half in the latest quarter, filings showed.
Schroder Investment Management Group bought 2.1 million shares in the SPDR fund, a filing showed. John Paulson, the largest investor in the product, maintained a stake that lost about $165 million in the first quarter. The billionaire is standing by the metal even after his Gold Fund saw declines of about 47% this year, two people familiar with the matter said this month. Global gold ETP holdings tracked by Bloomberg are valued at $98.1 billion, from $147.7 billion in October.
The metal gained 57% since the end of 2008 as the Federal Reserve was joined by central banks in Europe and Japan in seeking to boost economic growth by buying bonds. Bank of America says policymakers cut interest rates more than 500 times since June 2007. Prices may rebound to average $1,650 in the fourth quarter, Commerzbank AG said in a May 7 report.
“When the fundamentals are the same but the price lower, it strikes me that gold is on sale,” said Adrian Day, who manages about $140 million of assets as the president of Adrian Day Asset Management in Annapolis, Maryland.