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Gold’s London AM fix this morning was USD
1,725.50, EUR 1,309.88, and GBP 1,099.33 per ounce.
Yesterday's AM fix was USD 1,721.00, EUR 1,303.10, and
GBP 1,091.80 per ounce.
Currency Ranked Returns – (Bloomberg)
Gold ticked higher in Asia to $1,730/oz but has again shown weakness in early morning trade in
Europe and is trading at $ 1,725.90.
Gold is being supported by the never ending Greek debt
saga and increased tensions between Israel and Iran which has seen US crude
rise above $101 per barrel.
Gold continues to consolidate between $1,700/oz and $1,763/oz. After the strong gains seen in January,
more consolidation at these levels may be necessary prior to gold challenging
$1,800/oz.
Significant macroeconomic and geopolitical risk and the
appalling fiscal state of most major industrial nations
means that all fiat currencies will almost certainly fall against gold in the
coming months.
These risks have led to total gold ETF holdings rising
to near record levels and the SEC filings make for interesting reading.
Cross Currency Table – (Bloomberg)
While much of the focus has been on Paulson & Co.,
the hedge fund founded by billionaire John Paulson, cutting its stake in the
SPDR Gold Trust by 15% in the fourth quarter, possibly of more importance is
the fact that PIMCO, the Texas Teacher Retirement System and George Soros all
increased their holdings of the biggest exchange-traded product backed by
gold.
Paulson cut his gold ETF bullion holdings by about 600
million dollars in Q4, a reduction that was likely driven by client
redemption needs as he and his fund remain upbeat on gold – primarily
due to inflation concerns.
Paulson’s reduction in SPDR was offset by other
important buyers such as PIMCO, which oversees $1.36 trillion and is home to
the world's biggest bond fund and significant institutional buying from the
likes of the Texas Teacher Retirement System and billionaire investor George
Soros.
‘Bond King’, Bill Gross recently wrote
about gold as a “store of value” and PIMCO’s allocation to
GLD may be ongoing as they seek to diversify their portfolios and hedge
against inflation.
Soros, who once suggested gold was or would be
"the ultimate asset bubble," raised his stake in the SPDR Gold Trust
(GLD), a gold-backed exchanged-traded fund, to 85,450 shares, up from 48,350
shares in the period. Soros, who had disclosed call and put options on the
gold fund in the prior period, reported no such investments in the fourth
quarter.
Soros’ GLD position is worth a mere $13 million,
however it suggests that he is not as bearish on gold as portrayed and that
he sees further upside for gold.
Eton Park Capital, run by Eric Mindich,
retained its stake.
Vinik Asset Management, the Boston-based hedge fund
founded by Jeffrey Vinik, who formerly ran the
Fidelity Magellan Fund, held 2.6 million shares in the SPDR gold ETF as
of Dec. 31, down 775,000 shares from the end of the third quarter.
Tudor Investment, the $11 billion hedge fund based in
Greenwich, Connecticut, sold in entire stake of 200,000 shares of the
SPDR gold ETF. Patrick Clifford, a spokesman, declined to comment.
Steven A. Cohen’s SAC Capital and New York-based Touradji Capital Management LP cut SPDR gold
positions.
SAC Capital, which manages $14 billion and is based in Stamford, Connecticut, held 179,601
shares, compared with 184,601 in the third quarter. Jonathan Gasthalter, a spokesman for SAC Capital, declined
to comment.
Touradji Capital, founded by Paul Touradji,
sold its entire stake of 45,000 shares in the SPDR gold ETF. The hedge
fund bought the securities in the third quarter. Leslie, also a
spokesman for Touradji, declined to comment.
Lone Pine Capital LLC, the hedge fund run by Stephen
Mandel Jr., acquired 3.75 million shares of the SPDR gold ETF.
Stevens Capital Management Holdings Ltd. sold its
entire stake of 77,019 shares in the SPDR gold ETF. GLG Partners LP sold
its full stake of 94,675 shares.
Overall holdings in the SPDR Trust rose nearly 2% in
the fourth quarter, following a 2% gain in the third quarter.
Gold ETF holdings increased even though the price of
bullion fell around 4% in the fourth quarter – showing how ETF gold
demand is just one facet of global investment demand and demand for physical
bullion from investors in Asia and internationally and from central banks
remains more important than ETF demand.
Global holdings in exchange-traded products backed by
gold were 2,390.7 metric tons, approaching a record high, according to
Bloomberg data. They rose 4.8 percent in the fourth quarter and 7.8
percent in 2011. Central banks around the world added 157 tons to their
holdings in the six months ended Nov. 30, World Gold Council data show.
The SEC GLD data shows that diversification into gold
continues by some of the largest hedge funds and institutions in the
world.
It is worth noting that some hedge funds and
institutions are on record as having sold their GLD holdings in order to own
gold bars in allocated accounts.
This was done in order to avoid the transparency and
scrutiny that comes from owning the GLD (quarterly SEC filings). Others such
as Kyle Bass and David Einhorn have bought gold
bars in allocated accounts due to concerns about the significant counter
party risk in the world today.
UBS point out that looking solely at SEC GLD data as a
guide to sentiment towards gold may be deceptive as “it could very well
be the case that exposure to gold is merely transferred to other less-visible
channels”.
Bullion dealers internationally have seen a
significantly increased preference for gold bullion (coins and small and
large bars) in allocated accounts in recent months – especially in the
aftermath of the MF Global fraud and theft of clients assets.
Given the degree of counter party, re hypothecation and
systemic risk in the world the preference for outright legal ownership of
real physical metal is set to continue in the coming months.
This will rightly lead to an increased preference for
legal ownership of bullion coins and bars over exchange traded vehicles and
trusts with high levels of indemnification and significant counter party
risk.
OTHER NEWS
(Bloomberg) -- Shanghai Futures Exchange Lowers Gold Margins to Boost
Trading
The Shanghai Futures Exchange, China’s biggest metals bourse, lowered
the margins on gold for trading the contract in the final month before its
expiry to boost volumes and attract more investors.
The margin requirement, or the minimum amount of cash
that investors must keep on deposit, will fall to 10 percent from 15 percent
from the first trading day of the month before delivery, the Shanghai
exchange said in a statement on its website. The margin is also lowered to 20
percent from 40 percent for the last two days before the final trading day of
the contract.
Margins for contracts are initially set at 7 percent
from the day they are listed on the bourse, according to the statement. The
changes will be effective from March 1.
“The exchange’s move is aimed at boosting
trading at a time when volatility seems to have been tamed,” Zuo Xichao, manager at Beijing Antaike Information Development Co., said by phone from
Changsha today. “Lower margin requirements will make these investments
easier and more attractive because trading now requires less money to be locked
up.”
Gold futures on the Shanghai exchange gained 3.4
percent in 2011, climbing for the third year, as the escalating debt crisis
in Europe, slowing economic growth in the U.S. and rising inflation in China
boosted demand. Still the yuan-denominated gold
futures gained less than the 10 percent increase last year in the
spot-delivery gold traded overseas.
The June-delivery contract in Shanghai gained 0.5
percent to 352.18 yuan a gram today.
SILVER
Silver is trading at $33.76/oz,
€25.67/oz and £21.49/oz.
PLATINUM GROUP METALS
Platinum is trading at $1,636.00/oz, palladium at
$681/oz and rhodium at $1,500/oz.
NEWS
(Reuters)
Gold firms on hopes of Greek deal
(Bloomberg)
Soros Increased Stake in SPDR Gold Trust in Fourth
Quarter
(BusinessWeek)
Paulson, Vinik, Tudor Sell
SPDR Gold ETF Shares; Soros Buys
(Reuters)
Paulson cuts gold ETF more in Q4, upbeat view stays
(MarketWatch)
Gold ends lower, logs third-straight session loss
COMMENTARY
(Moneyweek)
Bonner: Tune out. Buy gold. Be happy.
(Adam Smith Institute)
The Government Bubble
(GoldSeek)
Monetary Inflation versus "Price
Inflation"
(ZeroHedge)
Jim Grant On Gold-Backed Bonds And 'The Hope
Leeches'
For breaking news and commentary on financial markets
and gold, follow us on Twitter
Mark
O’Byrne
Goldcore
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