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30-12-2011, 11:48 AM
Soros sees the bear behind the bullion
Some hedge funds slashing gold holding, saying the bubble's about to burst. Not all agree, however
by BLOOMBERG 09:57 AM Dec 30, 2011
NEW YORK - Gold is poised to complete its 11th consecutive annual gain, the longest winning streak in at least nine decades, on the brink of a bear market.
Mr George Soros, the billionaire who two years ago called it the "ultimate asset bubble", cut 99 per cent of his holdings in the first quarter, Securities and Exchange Commission data show. Hedge fund managers John Paulson, Paul Touradji and Eric Mindich also sold bullion this year.
While speculators in New York futures are the least bullish in 31 months, the median estimate in a Bloomberg survey of 44 traders and analysts is for prices to rally as much as 40 per cent to US$2,140 an ounce in 2012.
The divergence of views is widening after prices declined 19 per cent from a record close of US$1,900.23 on Sept 5, or 1 percentage point away from a bear market. As some investors retreated to cash amid a US$10 trillion slump in global equity values since May, others bought more metal, taking holdings in exchange-traded products to an all-time high two weeks ago. Bullion's 7.6-per-cent gain in 2011 means it is on track to beat stocks, bonds and the US dollar for a second straight year.
"It's done its job this year of protecting investors," said Mr Michael Cuggino, 48, who helps manage about US$15 billion of assets, including US$3 billion in gold, at Permanent Portfolio Funds in San Francisco and correctly predicted in February that prices would keep rising.
"Gold has been all over the place. If you bought gold at US$1,800 then you aren't too happy. Some people will get out of gold, but the longer-term investors will remain."
Bullion was at US$1,530.07 at 2.35pm in London yesterday, below this year's average of US$1,572.47 and six times more than when the bull market began in 2001.
Investment in physical metal is cooling. The US Mint's sales of American Eagle gold coins in November were the weakest since June 2008, data on its website show. Holdings in bullion-backed ETPs fell about 35 metric tons since reaching a record on Dec 14, according to data compiled by Bloomberg. They are still 140 tons higher than at the start of 2011 and the total of 2,326 tons, valued at about US$116 billion, exceeds the reserves (001.046) of all but four central banks. ETP holdings climbed 0.3 per cent yesterday, the first increase in two weeks.
Demand had strengthened most of this year as Europe's debt crisis widened and the US Federal Reserve pledged to keep interest rates near zero until at least mid-2013. The European Central Bank cut rates to 1 per cent on Dec 8, matching the record low of the euro era that began in 1999. That increases the appeal of bullion because it generally earns investors returns only through price gains.
"The longer-term trends, mainly government fiscal and monetary policies, haven't changed," said Mr Tom Winmill, who helps manage more than US$200 million of assets for Midas Funds. "Gold has that preservation-of-wealth role and was probably used quite a bit in the last several weeks."
Options traders are also bullish, with the top nine holdings all betting on higher prices. The two most widely held contracts give holders the right to buy gold at US$2,000 by the end of March and May, data from the Comex exchange show.
HEDGING THEIR BETS
That contrasts with money managers, who cut their wagers on a rally to 117,151 futures and options in the week ended Dec 20, from as many as 253,653 in August, according to data from the Commodity Futures Trading Commission. The hedge funds and other speculators are now the least bullish since May 2009, a month in which gold jumped 10 percent.
Mr Paulson, the billionaire fund manager mired in the worst slump of his career, sold 36 per cent of his stake in the SPDR Gold Trust in the third quarter, an SEC filing showed. Paulson & Co. remains the biggest investor in the largest gold-backed ETP, with a stake valued at US$3.17 billion.
Soros Fund Management, based in New York, sold almost all its shares in the SPDR Gold Trust and the iShares Gold Trust in the first quarter, SEC data show. Its 81-year-old founder, who made US$1 billion breaking the Bank of England's defence of the pound in 1992, said in January 2010 that buying at the start of a bubble was "rational".
The fund's gold sales preceded a decision in July to return the less than US$1 billion managed for outsiders and focus on family and foundation money. It bought more SPDR Gold Trust shares in the third quarter and added options, SEC data show.
"Gold became very overbought," said Charles Morris, who oversees about US$2.2 billion of assets at HSBC Global Asset Management in London and cut his bullion holdings to 6 per cent at the end of November from 15 per cent six months ago. "It will at least consolidate following this almighty rally. When the new bull market arrives, maybe a year or so away from now, then gold will once again prove to be a leading asset."
"Gold is going to go higher, but it's not going to go in a straight line," said Mr Martin Murenbeeld, the 67-year-old chief economist at Toronto-based DundeeWealth Inc, which manages about US$100 billion in the Dynamic Mutual Funds. "Gold has given positive returns, but it doesn't necessarily do it in the way that gives comfort, and that makes people nervous."
Some hedge funds slashing gold holding, saying the bubble's about to burst. Not all agree, however
by BLOOMBERG 09:57 AM Dec 30, 2011
NEW YORK - Gold is poised to complete its 11th consecutive annual gain, the longest winning streak in at least nine decades, on the brink of a bear market.
Mr George Soros, the billionaire who two years ago called it the "ultimate asset bubble", cut 99 per cent of his holdings in the first quarter, Securities and Exchange Commission data show. Hedge fund managers John Paulson, Paul Touradji and Eric Mindich also sold bullion this year.
While speculators in New York futures are the least bullish in 31 months, the median estimate in a Bloomberg survey of 44 traders and analysts is for prices to rally as much as 40 per cent to US$2,140 an ounce in 2012.
The divergence of views is widening after prices declined 19 per cent from a record close of US$1,900.23 on Sept 5, or 1 percentage point away from a bear market. As some investors retreated to cash amid a US$10 trillion slump in global equity values since May, others bought more metal, taking holdings in exchange-traded products to an all-time high two weeks ago. Bullion's 7.6-per-cent gain in 2011 means it is on track to beat stocks, bonds and the US dollar for a second straight year.
"It's done its job this year of protecting investors," said Mr Michael Cuggino, 48, who helps manage about US$15 billion of assets, including US$3 billion in gold, at Permanent Portfolio Funds in San Francisco and correctly predicted in February that prices would keep rising.
"Gold has been all over the place. If you bought gold at US$1,800 then you aren't too happy. Some people will get out of gold, but the longer-term investors will remain."
Bullion was at US$1,530.07 at 2.35pm in London yesterday, below this year's average of US$1,572.47 and six times more than when the bull market began in 2001.
Investment in physical metal is cooling. The US Mint's sales of American Eagle gold coins in November were the weakest since June 2008, data on its website show. Holdings in bullion-backed ETPs fell about 35 metric tons since reaching a record on Dec 14, according to data compiled by Bloomberg. They are still 140 tons higher than at the start of 2011 and the total of 2,326 tons, valued at about US$116 billion, exceeds the reserves (001.046) of all but four central banks. ETP holdings climbed 0.3 per cent yesterday, the first increase in two weeks.
Demand had strengthened most of this year as Europe's debt crisis widened and the US Federal Reserve pledged to keep interest rates near zero until at least mid-2013. The European Central Bank cut rates to 1 per cent on Dec 8, matching the record low of the euro era that began in 1999. That increases the appeal of bullion because it generally earns investors returns only through price gains.
"The longer-term trends, mainly government fiscal and monetary policies, haven't changed," said Mr Tom Winmill, who helps manage more than US$200 million of assets for Midas Funds. "Gold has that preservation-of-wealth role and was probably used quite a bit in the last several weeks."
Options traders are also bullish, with the top nine holdings all betting on higher prices. The two most widely held contracts give holders the right to buy gold at US$2,000 by the end of March and May, data from the Comex exchange show.
HEDGING THEIR BETS
That contrasts with money managers, who cut their wagers on a rally to 117,151 futures and options in the week ended Dec 20, from as many as 253,653 in August, according to data from the Commodity Futures Trading Commission. The hedge funds and other speculators are now the least bullish since May 2009, a month in which gold jumped 10 percent.
Mr Paulson, the billionaire fund manager mired in the worst slump of his career, sold 36 per cent of his stake in the SPDR Gold Trust in the third quarter, an SEC filing showed. Paulson & Co. remains the biggest investor in the largest gold-backed ETP, with a stake valued at US$3.17 billion.
Soros Fund Management, based in New York, sold almost all its shares in the SPDR Gold Trust and the iShares Gold Trust in the first quarter, SEC data show. Its 81-year-old founder, who made US$1 billion breaking the Bank of England's defence of the pound in 1992, said in January 2010 that buying at the start of a bubble was "rational".
The fund's gold sales preceded a decision in July to return the less than US$1 billion managed for outsiders and focus on family and foundation money. It bought more SPDR Gold Trust shares in the third quarter and added options, SEC data show.
"Gold became very overbought," said Charles Morris, who oversees about US$2.2 billion of assets at HSBC Global Asset Management in London and cut his bullion holdings to 6 per cent at the end of November from 15 per cent six months ago. "It will at least consolidate following this almighty rally. When the new bull market arrives, maybe a year or so away from now, then gold will once again prove to be a leading asset."
"Gold is going to go higher, but it's not going to go in a straight line," said Mr Martin Murenbeeld, the 67-year-old chief economist at Toronto-based DundeeWealth Inc, which manages about US$100 billion in the Dynamic Mutual Funds. "Gold has given positive returns, but it doesn't necessarily do it in the way that gives comfort, and that makes people nervous."
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