Gold Drops as Soros Further Reduces Holdings

May 16, 2013 at 08:34

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Gold traded near a one-month low as filings showed that George Soros and Blackrock Inc. cut holdings of bullion-backed exchange-traded products, adding to signs that investment demand is waning as U.S. equities rally to records.

Soros Fund Management LLC lowered its investment in the SPDR Gold Trust, the biggest gold-backed ETP, for a second straight quarter in the three months to March 31, a filing showed yesterday. Gold demand sank 13 percent to 963 metric tons in the first quarter as ETP sales outweighed buying from China and India, the World Gold Council said.

“Many people accumulated gold in the aftermath of the financial crisis in 2008 and with investors expecting economic improvement going forward, holdings in ETFs have more room to fall,” said Yang Xuejie, an analyst at Galaxy Futures Co., a unit of the brokerage controlled by the country’s sovereign wealth fund. “There’s always some physical buying at lower prices, however, that’s not enough to take the market higher.”

The volume for the benchmark contract on the Shanghai Gold Exchange, China’s largest cash market, rose for a second day to 15,917 kilograms yesterday from a one-month low on May 13, according to data on exchange’s website. In India, gold premiums more than doubled to as much as $40 an ounce yesterday. China and India are the world’s largest consumers.

Gold has dropped 17 percent this year, tumbling into a bear market last month, as some investors lost faith in the metal as a store of value. The dollar has rallied 5.1 percent against a six-currency basket including the yen and the euro in 2013, while the Standard & Poor’s 500 Index reached a record yesterday.

Holdings in the SPDR fell to 1,047.13 metric tons yesterday, the least since March 2009, according to data on the company’s website. They have shrunk 303.7 tons this year. Soros Fund Management lowered its investment 12 percent to 530,900 shares as of March 31, the filing showed. That followed a 55 percent cut in the fourth quarter of last year.

Paulson & Co., the largest investor in SPDR, maintained its stake, while funds run by Northern Trust and Blackrock showed reductions. Schroder Investment Management Group and Farallon Capital Management LLC bought shares. Total holdings in bullion ETPs are down 16 percent this year.