2011-11-17

Gold price continues to have time on its side

The gold price declined Wednesday, sliding $8.00 to $1,772.75 per ounce.Gold prices fell alongside broad-based weakness in global equity markets. The euro retreated against the U.S. dollar after a Bank of England statement warning that Europe’s sovereign debt crisis may have a “significant adverse” impact on the economy. S&P 500 stock futures fell 12.40 to 1241.70. Bucking the downtrend was crude oil, which broke out through $100 per barrel for the first time since July.

The gold price initially slid to as low as $1,759.10 per ounce in overnight trading after the release of Paulson & Co.’s latest 13-F filing. The firm – run by hedge fund magnate John Paulson – has been the largest holder of the GLD since the first quarter of 2009. The 13-F filing disclosed that Paulson & Co. sold 11.2 of its 31.5 million GLD shares during the third quarter of this year.

In spite of the sales, Paulson & Co. remains the largest holder in the GLD, with 20.3 million shares. Speculation arose that he may have sold at least a portion of fund redemptions, which were roughly 10% according to numerous reports. While Paulson reduced his GLD holdings, legendary investor George Soros increased his stake. Soros Fund Management raised its holdings from 42,800 as of June 30 to 48,350 shares. Other notable hedge fund managers – including Paul Tudor Jones and Paul Touradji – went from not having a GLD position as of June 30 to holding 200,000 and 45,000 shares, respectively, as of September 30.

Looking ahead, it is evident that despite Paulson’s sales, many highly-respected investors continue to accumulate significant positions tied to the gold price. The fact that Soros – who earlier this year was quoted as saying that gold is “the ultimate bubble,” – raised his GLD stake speaks to the strength of the yellow metal’s bull market.

As for Paul Tudor Jones, in October 2009 he wrote in an investor letter that “It (gold) is just an asset that, like everything else in life, has its time and place. And now is that time.” Based on his more recent actions, it appears that the gold price continues to have time on its side.

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