Soros Raises Gold Holding in Fourth Quarter

(By Chanyaporn Chanjaroen and Nicholas Larkin - Feb 15, 2011) - Billionaire investor George Soros increased his SPDR Gold Trust share holding by 0.5 percent in the fourth quarter and John Paulson kept his investment unchanged, filings with the U.S. Securities and Exchange Commission show.

Soros Fund Management LLC held 4,721,808 SPDR Gold Trust shares as of Dec. 31, compared with 4,697,008 shares at the end of the third quarter, according to the filing. Soros’s call options on 705,000 shares in the trust as of Sept. 30 weren’t listed in the latest report. Paulson & Co.’s holding, the largest in the SPDR fund, was 31.5 million shares.

A decade-long surge in gold has attracted investors seeking better returns than equities or bonds, and helped boost holdings in exchange-traded products backed by gold to a record in December. The metal’s climb last year to an all-time high was more than triple the gain in global equities, and bullion beat shares in five of the past six years.

“Investment demand remains the most important driver for the gold market,” said Daniel Brebner, an analyst at Deutsche Bank AG in London. “The entrance or exit of large funds in and out of exchange-traded products can give an idea of the conviction by these investors as to the prospects for gold.”

Investors in 10 gold-backed exchange traded products own metal valued at $89.2 billion according to Bloomberg calculations, even after cutting assets in tons by 4.5 percent since Dec. 20 when holdings peaked. Immediate-delivery gold traded at an all-time high of $1,431.25 an ounce on Dec. 7 and erased 4.1 percent since then to $1,373.15 today.

Soros, Paulson

Soros Fund Management LLC manages about $27 billion. The company’s SPDR Gold Trust holding was worth $655 million as of Dec. 31, the filing showed, representing 8.5 percent of the $7.7 billion total in the SEC filing. The firm’s holdings in the iShares Gold Trust of 5 million shares, also backed by the metal, remained unchanged as of Dec. 31 from the preceding quarter.

Soros described gold at the World Economic Forum’s meeting in Davos, Switzerland, in January last year as “the ultimate asset bubble.” In a Nov. 15 speech in Toronto the 80-year-old said conditions for the metal to keep rising were “pretty ideal” and at this year’s Davos forum he said the boom in commodities may last “a couple of years” longer.

Long-Term Investors

“Most ETP investors are long-term investors and keep holding assets regardless of what the price is doing,” said Carsten Fritsch, a Frankfurt-based analyst at Commerzbank AG. “I would expect them to keep invested on the long-term risk of printing of money by central banks” and on inflation concerns, he said.

Investor demand for precious metals accelerated after the collapse of Lehman Brothers Holdings Inc. in September 2008 and as governments and central banks led by the Federal Reserve pumped more than $2 trillion into the world financial system. That stoked concern that inflation will accelerate. The Fed cut interest rates to near zero in December 2008 and has kept them there since and Greece and Ireland got bailouts.

Soros’s holdings of Platinum Group Metals Ltd., a Vancouver-based miner, jumped to 12.7 million shares worth $34 million as of Dec. 31, from 1.5 million shares as of Sept. 30, filings showed. Platinum Group Metals said Feb. 9 it began developing a mine in northern South Africa with first production scheduled to start in 2013. The mine will produce platinum, palladium, rhodium and gold.

Palladium Gains

Palladium jumped 42 percent in the fourth quarter and platinum gained 6.8 percent.

Among his investments, Soros increased his stakes in Kinross Gold Corp., based in Toronto, bought shares in Pan American Silver Corp. and cut holdings in Toronto-based Barrick Gold Corp., the world’s biggest gold mining company, the filing shows.

Paulson, 55, who bet against U.S. mortgage markets amid the subprime crisis, is also the biggest owner of Johannesburg-based AngloGold Ashanti Ltd.,Africa’s biggest producer, filings and data compiled by Bloomberg show. His stake in the miner was little changed at 40.95 million shares in the fourth quarter, the filing shows. New York-based Paulson’s funds generated profits of more than $3 billion in 2007.

Put Options

Eric Mindich’s Eton Park Capital Management LP added 5 million put options on the SPDR Gold Trust as of Dec. 31 to bring the total to 8 million, its filings show. The company owned 4.5 million shares in the trust at the end of the year.

A put option gives the holder the right to sell the security at a set price and date. Bullion has declined 3.4 percent this year as signs the global economy is strengthening curbed demand for the metal.

Eton Park also bought a stake in Platinum Group Metals, purchasing 4.8 million shares, the filing shows.

Touradji Capital Management LP, founded by Paul Touradji, held 173,000 shares in the SPDR Gold Trust as of Dec. 31, according to an SEC filing. There was no holding listed in the filing as of Sept. 30. Leslie, also a spokesman for Touradji, declined to comment before the filings were made public.

Money managers who oversee more than $100 million in equities must file a Form 13F with the Securities and Exchange Commission 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.

ETPs trade on exchanges, with each share representing metal held in a vault. They accounted for 21 percent of gold investment demand last year, according to GFMS Ltd., a London- based research firm.