Friday, February 15, 2013

Soros and Bacon Cut Gold Ownership

My gut says the move will be correct in the short run, but the contrarian in me is starting to get interested. That is as gold is down more more than 1%, or around $20 per ounce, in trading this morning.

And the below excerpt comes via an article on Bloomberg. It concludes and surmises that an economy on the mend is cutting into gold demand. I don't know what the commentators discussing this dynamic are seeing, as in my mind a 1.5% year-over-year change in GDP and accelerated downside in employment levels suggest increased recession risks.

“The reduction in holdings by George Soros may unnerve the market a little bit,” said Nick Trevethan, a senior commodities strategist at Australia & New Zealand Banking Group Ltd. “The market may also be watching Paulson, and those are steady.”

Gold for April delivery fell as much as 0.3 percent to $1,630.10 an ounce on the Comex, the cheapest since Jan. 4, and was at $1,632.10 at 8:15 a.m. in London. The most-active price, which has lost 2.6 percent this year, declined 5.5 percent in the final three months of 2012, the most since the three months ended June 30, 2004.

‘Downside Risks’

Hedge funds have cut bets on a gold rally by 56 percent since reaching a 13-month high in October as manufacturing rebounded from the U.S. to China. It’s increasingly probable that prices peaked in 2011 and so-called downside risks are building as the world expands, Tom Kendall, an analyst at Credit Suisse Group AG in London, said in a report e-mailed Feb. 1. Futures rallied to $1,923.70 on Sept. 6, 2011.
Growth will accelerate in the U.S. and China, the two largest economies, in the coming quarters, according to more than 100 economists surveyed by Bloomberg. In the U.S., claims for jobless benefits dropped 27,000 to 341,000 in the week to Feb. 9, fewer than any of the 49 economists surveyed by Bloomberg projected, the Labor Department said yesterday.

Lone Pine Capital LLC, the hedge fund run by Stephen Mandel Jr., and Scout Capital Management LLC sold their entire stakes in the SPDR Gold Trust in the quarter, filings showed.
‘Looking Better’

Global gold investment, including bars, coins and ETPs, dropped 8.3 percent to 424.7 tons in the fourth quarter from a year earlier, the World Gold Council said in a report yesterday. Full-year investment slid 9.8 percent to 1,534.6 tons, it said.

The Standard & Poor’s 500 Index climbed to a five-year high yesterday and has surged 6.7 percent in 2013. The gauge has more than doubled since bottoming in March 2009 as the U.S. Federal Reserve conducted three rounds of bond buying to lower interest rates, boost growth and support the labor market.
The U.S. central bank will keep purchasing securities at the rate of $85 billion a month, according a statement from the policy-setting Federal Open Market Committee on Jan. 30. Gold may have a sharp rally as investors seek so-called real assets, Elliott Management Corp., the hedge fund founded by Paul Singer, said in a document accompanying its fourth-quarter report on Jan. 28, a copy of which was obtained by Bloomberg.

‘Come Back’

While people would rather invest in “economically sensitive commodities and equities” as data improved, “we may see people come back to gold if troubles in Europe get worse and problems in the U.S. reappear,” said Adrian Day, who manages about $160 million of assets as president of Adrian Day Asset Management in Annapolis, Maryland.

Germany’s economy, the largest in Europe, contracted 0.6 percent in the fourth quarter, and French GDP dropped 0.3 percent, according to data this week. Japan’s economy, the world’s third largest, is in recession after contracting an annualized 0.4 percent in the final quarter of 2012, following a revised 3.8 percent fall in the previous three months.

Michael Vachon, a spokesman for Soros, was not immediately available when called for comment and did not reply to an e-mail. Armel Leslie, a spokesman for New York-based Paulson & Co., which manages $18 billion, declined to comment. Kenny Juarez, a spokesman for Moore Capital, also declined to comment.
Money managers who oversee more than $100 million in equities must file a Form 13F with the SEC within 45 days of each quarter’s end to show their U.S.-listed stocks, options and convertible bonds. The filings don’t show non-U.S. securities or how much cash the firms hold.

“The economy is looking better, and people are moving to more remunerative assets like equities,” Paul Dietrich, chief executive officer of Foxhall Capital Management Inc., said in a telephone interview from Alexandria, Virginia. “A lot of people have lightened up on gold.”

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