UPDATE 1-Paulson sticks with bullish bets in gold ETF in Q4, others cut

Fri Feb 14, 2014 6:54pm EST
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By Frank Tang

NEW YORK Feb 14 (Reuters) - Hedge fund Paulson & Co maintained its stake in the world's biggest gold-backed exchange-traded fund, SPDR Gold Trust, in the fourth quarter, even as others exited when bullion prices posted their biggest annual loss in 32 years.

Well-known manager George Soros bought shares in Barrick Gold Corp, one of the world's top gold mining producers, while other institutional investors, including PIMCO, continued to cut their exposure to gold investments.

News that notable hedge funds held onto their gold holdings is expected to boost confidence among bullion investors, which has been shaken as the Federal Reserve began to trim its monetary stimulus amid a better economic outlook.

"The fact that hedge fund managers continue to hold gold bode well for investor sentiment towards the metal, especially since we've had such a strong start to the year," said Jeffrey Sica, chief investment officer of New Jersey-based Sica Wealth Management, which has over $1 billion in client assets.

Investors pay close attention to the quarterly filings by Paulson and other notable hedge fund managers because they provide the best insight into whether the so-called "smart money" has lost faith in gold as a hedge against inflation and economic uncertainty.

Since the beginning of the year, gold has gained nearly 9 percent, thanks to an equities retreat after last year's record run on doubts over the U.S. economic recovery and as emerging-market turmoil cast a shadow on global growth. In 2013, gold was down 28 percent.

"I am glad that Paulson is recognizing gold's fundamentals and (is) not influenced by these price movements," said Axel Merk, portfolio manager of California-based Merk Funds, which has more than $400 million in currency mutual fund assets.   Continued...