Physical gold sales are up, so why are the big hedge funds selling? Troy Gayeski, Senior Portfolio Manager at SkyBridge Capital explains.
While Indian and Chinese consumers are buying up gold as fast as they can, some of the largest hedge funds are dumping the yellow metal into the market.
Data from the World Gold Council show a strong appetite for gold in the world’s two most-populated countries. In the second quarter of 2013, Chinese buyers purchased 87% more gold than this time last year. In India, there was a 71% increase in purchases. Compare to the same time last year, worldwide retail gold purchases were up 53% to 1,083.2 metric tons, worth $50.6 billion based on today’s numbers.
(Read more: Demand for physical gold jumps 53% in second quarter)
Where there are buyers, there are sellers. And, in this case, the sellers seem to be some of the world’s biggest hedge fund players. According to recent forms filed with the SEC, several prominent hedge funds are reducing or have already liquidated their stake in the SPDR Gold Trust (GLD), the biggest ETF backed by gold reserves.
John Paulson halved his shares of GLD from 21.8 million down to 10.2 million, a decrease in nearly $1.5 billion worth of shares using today’s numbers. This is significant not just on size but because Paulson was a gold bull.
Others big players also got out of gold, though not to the extent Paulson did. George Soros looks to have liquidated his remaining 530,900 shares (worth $68.5 million) of GLD, though he still has some shares of the Market Vectors Junior Gold Miners ETF (GDXJ). Omega Advisors, helmed by Leon Cooperman, sold $13.9 million worth of GLD. And, in the midst of squabbling over the fate of Sony, Dan Loeb found time to sell off 130,000 shares of GLD from his Third Point fund. According to Loeb’s letter to Third Point investors, he exited gold at around $1,450 per ounce, making that stake worth $18.2 million.
(Read more: Soros takes a bite out of Apple after ditching gold)
Overall, gold ETFs saw 402.2 metric tons – worth nearly $18.8 billion – in outflows during the second quarter of 2013, with 252.6 metric tons coming out of the GLD.
So, do retail buyers in the gold markets of China and India have a better sense of where bullion is going next than New York-based hedge fund billionaires?
We talk numbers with Troy A. Gayeski, Senior Portfolio Manager at SkyBridge Capital. SkyBridge Capital has $8.2 billion under management and Gayeski has his finger on the pulse of hedge funds and their investments.
Looking at the charts is Talking Numbers contributor Enis Taner, Global Macro Editor at RiskReversal.com. He says the short-term direction of gold is different than where he thinks it is headed over the long-term.
To hear insights on gold from Gayeski and Taner, watch the video above.