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Gold Bulls Placing Bets Ahead of QE3

August 18, 2012 | About:

Gold investors appear to have followed the lead of investors such as George Soros and John Paulson. Both hedge fund managers recently revealed increased positions in gold and gold stocks.

Paulson raised his stake in GLD by 26 percent in the second quarter. Soros more than doubled his holdings of GLD.

According to a recent Bloomberg story both money managers see big gains ahead for the yellow metal.

"Paulson & Co., which owns the biggest stake in the SPDR Gold Trust, increased its holdings to 21.8 million shares in the three months through June. The New York-based $21 billion hedge fund firm had more than 44 percent of its U.S. traded equities tied to bullion, or 16 percent excluding the SPDR Gold Trust product, the filing showed. Paulson uses his stake in the product to back shares that are denominated in gold. Soros Fund Management LLC raised its stake to 884,400 shares."

The expectation is that Bernanke will announce QE3 at the Jackson Hole meeting in September. Investors will recall that Bernanke announced QE2 at a similar meeting in 2010.

Interestingly, demand for physical gold has been slowing in recent quarters. Sales at the US Mint have dropped by 49 percent to 30,500 ounces last month. This level of sales was last seen in April 2012.

Thus, it would appear that the hedge fund managers might be loading up on gold for a trade ahead of QE3 rather than buying gold for a long term position.

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