Gold demand in the third quarter increased 6% year over year to an all-time high, driven by investment demand, which increased 33%, to $468.1 tonnes, or $25.6 billion. The Gold Fund ETF (GLD) continued to climb 21% year to date. Often considered as a portfolio hedge against uncertainty, it is interesting to see what Gurus have done with the metal in an economically volatile quarter.
Paulson is famous for his wildly optimistic view on gold beginning in 2009. On April 1, 2009, he initiated Gold Share Classes for each of his funds, shortly after the Fed announced its $1.7 trillion quantitative easing, Paulson wrote in his 2010 year-end letter to investors. He believed the profuse printing of U.S. dollars would lead to currency depreciation, which would lead to a rush into gold. On April 1, 2009, gold was about $870 an ounce. For 2010, his Paulson Funds Gold Share Classes gained from 30% to 46%.
One of Paulson’s most headline-grabbing moves in the third quarter was his dramatic reduction in his Gold EFT (GLD). He owned 31.5 million shares he bought in the first quarter of 2009 at about $89 per share, and sold 11,226,460 shares in the third quarter for about $166 per share.
Many speculated that he needed the capital for redemptions. Though he cut his gold holdings, he liberally increased many of his gold mining shares in the third quarter. He bought more shares of NovaGold Resources (NG), RandGold Resources Inc. (NASDAQ:GOLD), AgnicoEagle Mines Ltd. (NYSE:AEM), IAMGOLD Corp. (NYSE:IAG), Barrick Gold Corp. (NYSE:ABX) and International Tower Hill Mines (THM).
His biggest increase by percentage was AgnicoEagle Mines Ltd. He owned 700,000 shares from the second quarter of 2011 at $64 per share, and added 308,700 shares at $64.
George Soros also made headlines for selling the majority of his gold shares in the first quarter of 2011 at about $135 per share, and further reducing in the second quarter at $147. He added 5,550 shares, however, in the third quarter at about $166 per share. As of September 30 he owns 48,350 shares.
In January 2010, George Soros called gold “the ultimate bubble” at the World Economic Forum in Davos, Switzerland. In September 2010, he clarified in an interview with Thompson Reuters: “I called gold the ultimate bubble which means it may go higher but it’s certainly not safe and it’s not going to last forever.”
In the third quarter 2011, Soros bought two new gold miners: International Tower Hill Mines (THM) and Franco Nevada Corp. (NYSE:FNV). International Tower Hill Mines Ltd. is a Canada-based resource exploration company possessing a portfolio of Alaskan and Nevada based gold and base metal exploration projects. The Company is currently focused on the Livengood Gold Project located in the north of Fairbanks, Alaska. Franco-Nevada Corporation is a gold focused royalty and stream company with additional interests in platinum group metals and other resource assets.
Soros, like Paulson, increased his holding of AgnicoEagle Mines Ltd. (NYSE:AEM), rounding out his 19,800 holding with 200 more shares at $64, about the same price he bought the rest of his shares.
Physical gold and Market Vectors Gold Miners are among Greenlight Capital’s top five disclosed long positions at September 30. He shared some of his thoughts on gold in his third-quarter letter: “Our gold investment was the second largest winner as the price advanced from $1,499 to $1,624 an ounce. During the quarter we exchanged a portion of our gold position for additional investment in the Market Vectors Gold Miners ETF (GDX). While the price of gold has advanced significantly, the shares of gold miners have not. It has reached the point where gold mining stocks should do well even in a stable gold market; we expect the price of gold to appreciate further, so gold miners should do even better. Even with the reduction, physical gold continues to be our largest portfolio holding.”
Einhorn added 3,718,000 shares to his GDX holding at $60 per share, and now owns 7,264,971 shares. He first bought GDX in the fourth quarter 2008 at $25 per share. Founded in May 2006, the Gold Miners ETF “provides exposure to publicly traded companies worldwide involved primarily in the mining for gold.” It has returned 7.37% since inception and lost 9.9% year to date. It holds 31 securities, the largest of which are Barrick Gold Corp, Goldcorp Inc. and Newmont Mining Corp at 16.5%, 13.1% and 10.9%, respectively, of the fund.
Recently, gold mining ETFs have experienced significant outflows. GDX had a 2.2% decrease week over week, with approximately $217 million in outflows, Forbes reported on Friday.
Daniel Loeb, whose Third Point hedge fund is down 0.3% year to date, named gold as one of his top five winners for the third quarter in his investor letter and reported it as his top holding. In the second quarter, he reported that gold was his third-largest position, and the fund was up 6.8% from the start of the year. “For the third phase, as the European picture continued to worsen and the markets tumbled in August and September, we took down gross exposure, further reflecting our bearish views,” Leb said in his third-quarter investor letter.
Loeb also owns 260,000 shares of GLD after selling 25,000 shares at $166 per share in the third quarter. His only two mining stock is Barrick Gold Corp. (NYSE:ABX). He sold out of FreeportMcMoRan Copper & Gold (NYSE:FCX) in the third quarter.
To see more of Gurus' gold trades, go here.
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