Soros, PIMCO, Paulson, Texas Teacher Retirement Fund Buy Gold in Q1

Published in Market Update  Precious Metals Update  on 16 May 2012

By Stephen Flood


Gold’s London AM fix this morning was USD 1,537.50, EUR 1,208.73, and GBP 966.31 per ounce. Yesterday's AM fix was USD 1,559.00, EUR 1,213.61 and GBP 969.95 per ounce.

Silver is trading at $27.33/oz, €21.59/oz and £17.24/oz. Platinum is trading at $1,427.50/oz, palladium at $592.60/oz and rhodium at $1,300/oz.

Gold fell $16.30 or 1.05% in New York yesterday and closed at $1,542.30/oz. Gold traded off in Asia hitting a low of $1,526.80/oz then recovered as the market opened in Europe and is now trading near $1,537.25. 


Cross Currency Table – (Bloomberg)

Support at $1,550 has been breached and gold is now testing support between $1,523/oz and $1,533/oz and below that is the psychological level of $1,500/oz.

Gold continued its drop this morning touching its lowest price level since December.  The huge uncertainty regarding the Greek political and economic situation is leading to heightened risk aversion and a preference for the sidelines of the dollar (by traders and hedge funds).

Many have liquidated leveraged positions and opted for the relative safety of cash due to falls in equity and commodity markets.

However, the uncertainty will be positive for gold as it is already leading to a pickup in physical demand in both western and especially Asian markets which has been moribund in recent weeks.

Greek leaders are meeting today in efforts to form an interim government that will take the country into its 2nd election within a short month period. The Greek president warned of "fear that could develop into panics" at its banks. Greeks are already withdrawing euros from banks, apparently for fear of rapid devaluation should the country leave the euro zone, according to minutes from president Karolos Papoulias' negotiations with political leaders.

The eurozone instability is hurting the euro – so far the beneficiaries have been the dollar and bonds. However, gold will likely soon benefit as more speculative players and weak hands have been washed out of the market and physical demand is picking up.

In India the wedding season has just begun and after the recent strike, there is much expected pent up demand in India.

Gold has dropped 1.9 percent in 2012 to $1,536.60 an ounce on the Comex in New York, and lost 20% since reaching a nominal record of $1,920/oz last year.


Gold in USD - 5 Years (Bloomberg)

After the Lehman collapse in September 2008, gold fell by less than other assets, roughly 30% from peak to trough, and then recovered the losses soon after (see chart above).

Gold has again been correlated with risk assets recently as it was in the aftermath of the Lehman collapse and contagion crisis but this correlation will again be seen as short term.

Prices climbed 6.7% in the first quarter but since March 30, gold has tumbled 8.1% and is poised for the biggest quarterly loss since 2004 (see chart below). 

This will be technically damaging but it is worth noting that gold recovered sharply from that quarterly loss in 2004 and the strong fundamentals of continuing institutional and central bank diversification into gold suggests the same may happen again in 2012 and into 2013.

Soros, PIMCO, Paulson, Texas Teacher Retirement Fund Buy Gold in Q1
Prudent money with an understanding of gold's long term diversification benefits continues to accumulate gold as seen in the latest SEC filings.

Billionaire investor George Soros significantly increased his shares in the SPDR Gold Trust in the first quarter. Soros Fund Management nearly quadrupled its investment in the largest exchange-traded gold fund (GLD) to 319,550 shares - compared with 85,450 shares at the end of the fourth quarter.

John Paulson maintained his large stake, the ETF’s largest stake and other large and respected institutional buyers were PIMCO and the Teacher Retirement System of Texas.

Paulson, 56, who became a billionaire in 2007 by betting against the U.S. subprime mortgage market, told clients in February that gold is a good long term investment, serving as protection against currency debasement, rising inflation and a possible breakup of the euro.

Eric Mindich’s Eton Park Capital also bought  739,117 shares in the SPDR Gold Trust during the first quarter. The New York-based fund held no shares of the exchange-traded product as of December 31.

Overall holdings in the SPDR Trust rose just over 8% in the first quarter, after a 2% gain in Q4 2011.

Global holdings in ETFs backed by bullion have seen slight declines in the last 3 months, the longest losing streak since 2004. Assets in the SPDR Gold Trust, the largest fund backed by bullion, reached at 1,309.92 metric tons on Aug. 8 and appear to be consolidating at these levels as were at 1,277.11 tons as of yesterday. 

Paulson has to date been the biggest holder of SPDR shares, using them to hedge currency exposure, while other managers such as David Einhorn and Daniel Loeb have favoured more discrete, more cost effective and safer option of owning physical gold bullion.

OTHER NEWS
(Bloomberg) -- Gold in Euros Falls to 1,204.84 An Ounce, Lowest Since Jan. 2
Gold fell to 1,204.84 euros an ounce by 7:57 a.m. in London, the lowest price since Jan. 2.

(Bloomberg) -- Gold-Silver Ratio Climbs to Highest Level in More Than 4 Months 
One ounce of gold bought as much as 56.0258 ounces of silver today, the most since January 9, according to Bloomberg data. The so-called ratio was at 55.9876 b 12:06 p.m. in Singapore.

(Bloomberg) -- Spot Gold Drops 20% From Record to Enter Bear-Market Territory
Immediate-delivery gold fell 20 percent from last year’s record, entering a so-called bear market. The price, which peaked last September at $1,921.15 an ounce, dropped 0.6 percent to $1,534.55 an ounce.


Gold in USD in 2004 – Showing Q2 Loss Prior to Gains in Q3 and Q4

(Bloomberg) -- India Sets Benchmark Import Price of Gold at $507 Per 10 Grams
India set the benchmark price for imports of gold at $507 per 10 grams, according to a statement from the finance ministry dated yesterday.

The benchmark price for imports of silver was set at $920 per kilogram.

The benchmark prices are used to set the tax on precious metal imports.

(Bloomberg) -- India Has No Plans to Further Raise Import Duty on Gold 
India, the world’s biggest importer of gold, has no plans to further increase the import duty on bullion, junior commerce minister Jyotiraditya Scindia said in reply to query in parliament today.

The government raised the duty to 4 percent from 2 percent effective from March 17, Scindia said.

(Reuters Global Gold Forum) – Indian Gold Demand - “Decent Volumes”
On the physical markets today, the drop in the rupee to record lows against the dollar has not deterred buying in India, where local dealers say the drop in the domestic price of gold to six-week lows has unleashed demand in "decent volumes", although the weakness of the currency is an issue, they say.

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NEWS
Gold hits new low on Greece turmoil - Reuters

Gold Seen Gaining as Plunge to Year-Low Spurs Investment - Bloomberg

Gold Eclipsed by Dollar Haven as Goldman Sees Rally - Bloomberg

Gold settles at 2012 low as dollar gains on Greece – Market Watch

COMMENTARY
Germany will blink, and won’t let Greece exit euro - MarketWatch

HSBC Securities's Steel on Gold Outlook - Bloomberg

The All-Important Question – Casey Research

What Will Happen to Greece and Gold? - GoldSeek

This is Why World Markets are Incredibly Unstable – King World News

India's Temple Of Gold – Zero Hedge


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