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PIMCO, Texas Teacher Retirement System, Soros Buy GLD; Paulson Sells

Commodities / Gold and Silver 2012 Feb 15, 2012 - 09:05 AM GMT

By: GoldCore

Commodities

Best Financial Markets Analysis ArticleGold’s London AM fix this morning was USD 1,725.50, EUR 1,309.88, and GBP 1,099.33 per ounce.

Yesterday's AM fix was USD 1,721.00, EUR 1,303.10, and GBP 1,091.80 per ounce.


Currency Ranked Returns – (Bloomberg)

Gold ticked higher in Asia to $1,730/oz but has again shown weakness in early morning trade in Europe and is trading at $ 1,725.90.

Gold is being supported by the never ending Greek debt saga and increased tensions between Israel and Iran which has seen US crude rise above $101 per barrel.

Gold continues to consolidate between $1,700/oz and $1,763/oz. After the strong gains seen in January, more consolidation at these levels may be necessary prior to gold challenging $1,800/oz.

Significant macroeconomic and geopolitical risk and the appalling fiscal state of most major industrial nations means that all fiat currencies will almost certainly fall against gold in the coming months.

These risks have led to total gold ETF holdings rising to near record levels and the SEC filings make for interesting reading.

Cross Currency Table – (Bloomberg)

While much of the focus has been on Paulson & Co., the hedge fund founded by billionaire John Paulson, cutting its stake in the SPDR Gold Trust by 15% in the fourth quarter, possibly of more importance is the fact that PIMCO, the Texas Teacher Retirement System and George Soros all increased their holdings of the biggest exchange-traded product backed by gold.

Paulson cut his gold ETF bullion holdings by about 600 million dollars in Q4, a reduction that was likely driven by client redemption needs as he and his fund remain upbeat on gold – primarily due to inflation concerns.

Paulson’s reduction in SPDR was offset by other important buyers such as PIMCO, which oversees $1.36 trillion and is home to the world's biggest bond fund and significant institutional buying from the likes of the Texas Teacher Retirement System and billionaire investor George Soros.

‘Bond King’, Bill Gross recently wrote about gold as a “store of value” and PIMCO’s allocation to GLD may be ongoing as they seek to diversify their portfolios and hedge against inflation.

Soros, who once suggested gold was or would be "the ultimate asset bubble," raised his stake in the SPDR Gold Trust (GLD), a gold-backed exchanged-traded fund, to 85,450 shares, up from 48,350 shares in the period. Soros, who had disclosed call and put options on the gold fund in the prior period, reported no such investments in the fourth quarter.

Soros’ GLD position is worth a mere $13 million, however it suggests that he is not as bearish on gold as portrayed and that he sees further upside for gold.

Eton Park Capital, run by Eric Mindich, retained its stake.

Vinik Asset Management, the Boston-based hedge fund founded by Jeffrey Vinik, who formerly ran the Fidelity Magellan Fund, held 2.6 million shares in the SPDR gold ETF as of Dec. 31, down 775,000 shares from the end of the third quarter.

Tudor Investment, the $11 billion hedge fund based in Greenwich, Connecticut, sold in entire stake of 200,000 shares of the SPDR gold ETF. Patrick Clifford, a spokesman, declined to comment.

Steven A. Cohen’s SAC Capital and New York-based Touradji Capital Management LP cut SPDR gold positions.

SAC Capital, which manages $14 billion and is based in Stamford, Connecticut, held 179,601 shares, compared with 184,601 in the third quarter. Jonathan Gasthalter, a spokesman for SAC Capital, declined to comment.

Touradji Capital, founded by Paul Touradji, sold its entire stake of 45,000 shares in the SPDR gold ETF. The hedge fund bought the securities in the third quarter. Leslie, also a spokesman for Touradji, declined to comment.

Lone Pine Capital LLC, the hedge fund run by Stephen Mandel Jr., acquired 3.75 million shares of the SPDR gold ETF.

Stevens Capital Management Holdings Ltd. sold its entire stake of 77,019 shares in the SPDR gold ETF. GLG Partners LP sold its full stake of 94,675 shares.

Overall holdings in the SPDR Trust rose nearly 2% in the fourth quarter, following a 2% gain in the third quarter.

Gold ETF holdings increased even though the price of bullion fell around 4% in the fourth quarter – showing how ETF gold demand is just one facet of global investment demand and demand for physical bullion from investors in Asia and internationally and from central banks remains more important than ETF demand.

Global holdings in exchange-traded products backed by gold were 2,390.7 metric tons, approaching a record high, according to Bloomberg data. They rose 4.8 percent in the fourth quarter and 7.8 percent in 2011. Central banks around the world added 157 tons to their holdings in the six months ended Nov. 30, World Gold Council data show.

The SEC GLD data shows that diversification into gold continues by some of the largest hedge funds and institutions in the world.

It is worth noting that some hedge funds and institutions are on record as having sold their GLD holdings in order to own gold bars in allocated accounts.

This was done in order to avoid the transparency and scrutiny that comes from owning the GLD (quarterly SEC filings). Others such as Kyle Bass and David Einhorn have bought gold bars in allocated accounts due to concerns about the significant counter party risk in the world today.

UBS point out that looking solely at SEC GLD data as a guide to sentiment towards gold may be deceptive as “it could very well be the case that exposure to gold is merely transferred to other less-visible channels”.

Bullion dealers internationally have seen a significantly increased preference for gold bullion (coins and small and large bars) in allocated accounts in recent months – especially in the aftermath of the MF Global fraud and theft of clients assets.

Given the degree of counter party, re hypothecation and systemic risk in the world the preference for outright legal ownership of real physical metal is set to continue in the coming months.

This will rightly lead to an increased preference for legal ownership of bullion coins and bars over exchange traded vehicles and trusts with high levels of indemnification and significant counter party risk.

OTHER NEWS
(Bloomberg) -- Shanghai Futures Exchange Lowers Gold Margins to Boost Trading
The Shanghai Futures Exchange, China’s biggest metals bourse, lowered the margins on gold for trading the contract in the final month before its expiry to boost volumes and attract more investors.

The margin requirement, or the minimum amount of cash that investors must keep on deposit, will fall to 10 percent from 15 percent from the first trading day of the month before delivery, the Shanghai exchange said in a statement on its website. The margin is also lowered to 20 percent from 40 percent for the last two days before the final trading day of the contract.

Margins for contracts are initially set at 7 percent from the day they are listed on the bourse, according to the statement. The changes will be effective from March 1.

“The exchange’s move is aimed at boosting trading at a time when volatility seems to have been tamed,” Zuo Xichao, manager at Beijing Antaike Information Development Co., said by phone from Changsha today. “Lower margin requirements will make these investments easier and more attractive because trading now requires less money to be locked up.”

Gold futures on the Shanghai exchange gained 3.4 percent in 2011, climbing for the third year, as the escalating debt crisis in Europe, slowing economic growth in the U.S. and rising inflation in China boosted demand. Still the yuan-denominated gold futures gained less than the 10 percent increase last year in the spot-delivery gold traded overseas.

The June-delivery contract in Shanghai gained 0.5 percent to 352.18 yuan a gram today.

SILVER
Silver is trading at $33.76/oz, €25.67/oz and £21.49/oz.

PLATINUM GROUP METALS
Platinum is trading at $1,636.00/oz, palladium at $681/oz and rhodium at $1,500/oz.

For the latest news and commentary on financial markets and gold please follow us on Twitter.

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