Why Has Druckenmiller Dived In Gold And Copper
Ashraf Laidi | Aug 17, 2015 07:46AM ET
Four weeks after gold tumbled to 5-year lows on revelation of far lower Chinese gold holdings than previously anticipated, gold bulls find out that one of the world's greatest hedge fund managers made gold the biggest holding in his fund in Q2. He also loaded up on 2 large miners.
Stan Druckenmiller's family office, Duquesne Capital Management, bought 2.9 mn shares of SPDR Gold Shares (NYSE:GLD), worth $323.6 million at the end of June, according to the Securities and Exchange Commission's quarterly filing. Duquesne's gold ETF purchase bumped the fund's Facebook (NASDAQ:FB) holdings off the 2nd position to become the biggest holding in the $1.47 bn fund.
Druckenmiller acted as George Soros' chief strategist when he helped execute the shorting of the British pound to the extent of forcing the UK out of the Exchange Rate Mechanism in September 1992. Since its inception in 1986, Duquesne has had an average return of 30% per year. In early May, Druckenmiller told Bloomberg in May that interest rates were likely to stay near 0% for 10 years, casting doubt over whether the Fed would ever move to liftoff.
h2 Druckenmiller vs Paulson/h2Despite the scale and timing of Druckenmiller's gold position, it remains unclear whether the trade is a long-term bet on the stabilisation of gold resulting from a possible peak in the USD and lack of Fed hikes, or is a short-term trade aimed at taking profit after a brief bounce. The fact that Druckenmiller has also purchased 1.28 mn shares of gold miner Newmont Mining (NYSE:NEM) and 3.6 mn shares of copper giant Freeport-McMorcan in the same quarter could indicate he's in it for the long run.
In contrast to Druckenmiller, John Paulson, the biggest holder of the GLD ETF, sold 11% of his holdings in Q2 after initially slashing them by 50% in Q2 2013 during gold's 25% collapse that quarter. While Paulson is the biggest owner of GLD, accounting 4% of the ETF, the fund makes up less than 5% of Paulson & Co's holdings, ranking 7th out of 64 different securities.
As John Paulson is quietly planning an exit out of his gold holdings, Druckenmiller is prominently loading up on the yellow metal.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.