John Paulson’s Gold Fund lost 27% in April, according to a report on BloombergTuesday, citing someone familiar with the matter.
That’s a chunk of change, and explains why the SPDR Gold fund keeps heading south, says Tyler Durden over at ZeroHedge.
Durden says there may be a gold lining amid signs of major selling from Paulson and others. ”The good news is that once levered players such as Paulson are finally blown out, there is hope that only far more rational, ‘non-weak handed’ players remain at the table,” he says. (A Paulson spokesman didn’t immediately return a request for comment.)
The GLD fund has lost nearly 14% year to date, including down 8% for May so far.
Of course, we won’t know for sure whether Paulson and others have been selling GLD and other gold ETFs until the first-quarter 13F filings come out around mid-month, says ETF Trend’s John Spence. What we do know is that at the end of the fourth quarter, Paulson was the biggest GLD shareholder, he says. Read his piece on how gold ETFs are a new indicator.
Michael Hewson, senior market analyst at CMC Markets, says the recent gold plunge does appear to have “shaken out some of the more fair-weather long positions.” But he also says the recent rebound is lacking some conviction and gold in the short term could break below lows seen so far this year of around $1.440 an ounce. (Tuesday’s action on gold has not been pretty, even after that Australian interest-rate cut.).
“That doesn’t necessarily mean that we won’t go higher sometime in the future. For now, though, with a relatively benign inflationary environment, there are higher yielding assets and more risky assets to put capital into, with the German DAX now joining the S&P500 and the Dow at record highs. We need to get back above $1,520, the recent break-out level, to stabilize, and I have no doubt that further down the line the environment for a higher gold price will manifest itself, if as seems likely, the Eurozone crisis goes through another crisis phase,” says Hewson.
But even if Paulson and others have exhausted their gold selling, there still seems to be several around who aren’t out of steam. Blogger Michael Arold says gold is setting up like a “textbook-like short entry,” and he’s about to push the sell button, betting against one ETF in particular.
But maybe it’s not all that bad if you are a GLD investor. ETF Trend’s Spence says. While outflows — more than $14 billion year to date — have been significant, “long-term GLD investors are still sitting on nice gains despite the recent sell-off. It seems that a lot of GLD investors are true believers in gold or those that will keep at least a small percentage of their portfolio in gold as disaster insurance.”
The question is, he says, is how much more pain will they need to feel to exit that gold trade.
One less source of pain will be central banks, said UBS in a note Tuesday:
“While there is risk of central-bank gold sales, we in commodity strategy remain somewhat skeptical of any swift, and large gold sales from Cyprus, and highly skeptical of any significant broad-based sales from EU’s other central banks,” the analysts said in a note.