Tuesday, October 5, 2010

Who has been buying Gold?


The past 2 years we have seen a string of  big name individuals, hedge funds and countries buying into Gold through the purchase of related equities, ETFs and physical. I thought it might be interesting to briefly go through some of the examples.


Individuals and Companies

There are some big names that have associated with Gold recently. One of the most well known names promoting Gold was recently synonymous for making the "The Greatest Trade Ever" when betting against subprime mortgages and making $15b in just one year for his firm. That is of course John Paulson of Paulson & Co Hedge Fund.

In early 2009 it was identified that Paulson had acquired a large position in GLD (SPDR Gold Trust), further to this it was obvious he was gearing towards increased Gold exposure with larger and new positions in Gold miners.
Paulson’s Hedge Fund Bought Gold Stock, Miners in First Quarter
Paulson & Co., the hedge-fund firm run by billionaire John Paulson, increased its investment in gold and gold-mining shares in the first quarter, according to a regulatory filing. As of the end of the first quarter, Paulson was the largest holder of SPDR Gold Trust, an investment fund that buys gold bullion. The New York-based firm owned 8.7 percent of the fund, valued at $2.8 billion as of March 31, according to a filing with the U.S. Securities and Exchange Commission.
Bloomberg
Later in 2009 Paulson announced he was starting a new Gold fund and was investing $250m of his own personal money.
Paulson Said to Plan Fund Betting on Gold, Mining Companies
Paulson & Co., the hedge-fund firm run by billionaire John Paulson, is starting a gold fund that will invest in mining companies and bullion-related derivatives, a person familiar with the plan said. Paulson will invest as much as $250 million of his own money in the fund.
Bloomberg
In a recent talk at the University Club in New York Paulson said that Gold could go to US$2400 based on fundamentals, but momentum could carry the price through to US$4000 per ounce.
How to Bet Like John Paulson
Speaking to the University Club in New York, he said, first, that gold could go to $2,400 an ounce based on the fundamentals–and that momentum could carry it to $4,000 an ounce. Right now it's around $1,300.
WSJ
Another well known hedge fund manager, Paul Tudor Jones, best known for his predicting of (and tripling of his money using shorts during) Black Monday in 1987 recently said that now is the time for Gold.
Paul Tudor Jones Says Now Is Time, Place for Gold as an Asset
“I have never been a gold bug,” Jones, whose company manages about $11.6 billion out of Greenwich, Connecticut, told investors in an Oct. 15 letter, a copy of which was obtained by Bloomberg News. “It is just an asset that, like everything else in life, has its time and place. And now is that time.”
Bloomberg
Thomas Kaplan (billionaire) who manages Tigris Financial Group was recently quoted saying that the only asset he has confidence in is Gold.
A Billionaire Goes All-In on Gold
Many fund managers and high-rollers have allocated small percentages of their portfolios to gold as a hedge against inflation. But Mr. Kaplan is the bull of bullion. He has gone further than perhaps any other major investor, betting the majority of his wealth on gold and other precious metals. And it reflects his deeply held conviction that global economic instability could bring rising demand for gold.
WSJ
In early 2009 Soros was seen to be promoting Gold as an asset that people will be driven into through fear.
Gold Is a Good Bet, Soros Implies
Soros said “that’s the fear that drives people into gold.” Soros wouldn’t say whether he’s investing in or owns gold but certainly implied that gold is a safer and good bet. More explicitly, he agreed with the view there’s a bubble in Treasuries that’s likely to burst sooner rather than later. If even a very small amount of the capital in the Treasury and bond markets flow into the very small gold market, gold will rise very significantly in the coming months.
Seeking Alpha
In late 2009 Soros was quoted as having said that Gold is the "ultimate bubble". Actions speak louder than words however and with the Soros Fund continuing to accumulate positions in the 4th quarter it was obvious that this was one bubble that he wanted a part of.

Soros warns that gold is the ‘ultimate bubble’
As of June 30, the Soros fund held 5.24 million shares of the SPDR Gold Trust, a stake worth about $650 million on Tuesday. Soros was the third-largest fund in the exchange-traded fund at the end of the second quarter.

The Soros fund also held equity holdings in miners of gold and other minerals worth almost $250 million on June 30.
CNBC
Other notable figures who have talked about buying precious metals in recent years include: Peter Schiff, Marc Faber, Jim Rogers, Eric Sprott and I'm sure there are others I've missed. 


Countries

Further to the buying above by individuals and hedge funds, there has been quite a few countries adding to the Gold positions/reserves via their central banks.


China is the first that comes to mind, they announced in early 2009 that they had increased their Gold reserves by 76% to a total of 1,054 tons. It would be prudent to expect that they are continuing to add to their position quietly both through purchase of internal production as well as securing interests in foreign companies which have Gold exposure/assets.

China Increases Gold Reserves 76% to Fifth-Largest
China boosted its gold reserves by 76 percent since 2003 and has the world’s fifth-biggest holding by country, said Hu Xiaolian, head of the State Administration of Foreign Exchange.

The nation increased its reserves by 454 tons to 1,054 tons through domestic purchases and refining scrap metal, Hu said in an interview with the Xinhua News Agency today. The amount is more than Switzerland’s 1,040 tons, World Gold Council data show, and is worth $31 billion at current prices.

Bloomberg
Later in 2009 it was announced that India had bought 200 tons of the 400+ that the IMF had announced they were selling. It was from around the time of this purchase with Gold at US$1045 that the price of Gold really started to pickup momentum which carried it to a price higher than $1200 by early December before falling in price and consolidating over the next 8 months.
Gold Trades Near Record as Indian Central Bank Buys From IMF
Gold traded within 0.5 percent of a record after India’s central bank bought 200 metric tons of the metal from the International Monetary Fund, heightening speculation about more official purchases.

“It’s positive in many ways,” said James Moore, an analyst at TheBullionDesk.com in London. “It suggests central banks, rather than being net sellers, are now looking at becoming net buyers. It’s a surprise because everybody was talking about China being the buyer.”
Bloomberg
 India's purchase was followed up by a purchase from Mauritius in late 2009.
Mauritius Buys IMF Gold, Follows India as Metal Soars
Mauritius bought 2 metric tons of gold from the International Monetary Fund, underscoring a drive by central banks to boost holdings as the precious metal trades near a record and the dollar slumps. The $71.7 million sale to the Bank of Mauritius was based on market prices on Nov. 11, the IMF said in an e-mailed statement yesterday.
Bloomberg
 Bangladesh has also recently purchase 10 tons of Gold.
Gold Rises on Bangladesh Purchase From IMF, Demand Speculation
Gold rose for the first time in three days in London on Bangladesh’s purchase of 10 metric tons of bullion from the International Monetary Fund and on speculation that the earlier declines will spur physical demand. Bangladesh’s central bank bought the metal for about $403 million based on market prices prevailing on Sept. 7, the IMF said yesterday.
Bloomberg
Russia has been adding to their reserves steadily for some years now. Russia's President, Dmitry Medvedev in July 2009 even pulled out a Gold coin at a G8 meeting proposing it as a potential new world currency.
IMF Gold Assets Fall 16.85 Tons as Russia Adds to its Holdings
The International Monetary Fund’s gold reserves fell by 16.85 metric tons in July as Russia added 16.2 tons to its holdings, according to figures from the Washington-based lender.
Bloomberg
 Chart of Russia's central bank Gold reserves:


During a sell off in the Euro Iran announced they were selling Euros and buying US Dollars and Gold.
Iran to sell 45 bln euros, buy dollars, gold
The Iranian central bank has announced that it will sell 45 billion euros from its foreign exchange reserves to buy dollars and gold, China's official Xinhua news agency reported on Wednesday, citing unspecified Iranian media reports.
Reuters
 Even Thailand is now suspected of increasing their Gold holdings.
Thailand: who’s buying gold?
Gold demand is volatile, especially in Asia, but what on earth is happening in Thailand? According to some numbers buried in the Thai customs website, gold imports in July, the latest month for which data is available, hit Bt55.4bn ($1.8bn), which is equivalent to a bit less than 45 tonnes and more than 13 times June imports of Bt4.1bn ($130m).
Financial Times

Who else?


To recap, we have some of the world's richest men and smartest hedge fund managers who have been buying Gold, Paulson, Soros, Kaplan, Tudor Jones , Sprott, Rogers, Schiff, Faber and others. Further to this China has been buying as well as India, Mauritius, Bangladesh, Russia, Iran and potentially Thailand...

So that brings us to the question, who else has been buying Gold? Well I for one have been buying Gold, personally my exposure is predominantly through Gold explorers and producers listed on the ASX.

That leaves only one question, have you been buying Gold?



BB.

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