The 5 percent or so pullback in the price of gold as well as gold exchange traded funds and mining stocks in recent weeks has sparked a debate over whether gold’s rapid runup has peaked, or simply a correction that is offering a great chance to buy in at a lower price.
Like the shares of Apple, many hedge funds will be heavily impacted by the answer. For gold has also been one of the hot plays among the fast money crowd.
Perhaps the person who has most at stake is John Paulson. He is said to have a bulk of his personal assets in his gold fund or gold shares of his other funds. In addition, at the end of the third quarter five gold mining stocks accounted for 14 percent of his funds’ assets. “We believe all of the stocks have upside potential in a flat gold price environment but would rise even more in a in a higher price environment,” Paulson told investors in his third quarter letter.
At the end of the third quarter, Paulson's funds owned 31.5 million shares in SPDR Gold Shares, easily making him the ETF’s number one holder. The fund, which was also Paulson’s largest holding, seeks to replicate the performance of the price of gold bullion.
Paulson's biggest holding in a gold mining stock at the end of the third quarter was Anglogold Ashanti, which explores and produces gold. Paulson was also the company’s largest investor even though he trimmed his holding by more than 6 percent in the three-month period. The billionaire manager said in the client letter he likes the stock because it is the largest gold miner in the world but had the lowest price-to-net asset value among its peers.
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