Billionaire John Paulson, the best- known gold bull since he started wagering on bullion more than three years ago, is backing away from his bet.
Paulson told clients at his firm’s annual meeting yesterday in New York that he personally wouldn’t invest more money in his gold fund because it’s not clear when inflation will accelerate, according to a person familiar with the matter. The hedge-fund manager, who has been betting that bullion would rally as a hedge against inflation and as recently as last year told clients that gold was his best long-term bet, has lost 63 percent year-to-date in the PFR Gold Fund, said the person, who was briefed on the returns and asked not to be identified because the information is private.
Paulson, 57, started his foray into gold in early 2009, betting that bullion would rise as governments printed money to revive their economies following the 2008 financial crisis. Gold-related securities helped drive losses for the firm in 2012 as mining company stocks fell. Paulson & Co.’s main strategies have gained this year on bets in mergers, defaulted securities, convertible bonds and telecommunications, energy, insurance and asset-management companies.
The fund, which has shrunk to $370 million -- with most of that John Paulson’s own money -- from $1 billion at the end of 2012, fell 1.2 percent in October, the person said. The hedge- fund firm will maintain the fund’s positions in gold stocks and let options related to bullion expire, Paulson said at yesterday’s meeting in Paulson & Co.’s office, according to the person.
Armel Leslie, a spokesman for $19 billion Paulson & Co. with WalekPeppercomm, declined to comment on the meeting and fund returns.
Bullion’s Slump
Gold is heading for its first annual drop in 13 years as some investors lost faith in the metal as a store of value, fueled by concern that expected reductions in $85 billion of monthly bond buying by the U.S. Federal Reserve will ease the risk of accelerating inflation. Billionaires George Soros and Daniel Loeb sold their entire positions in the SPDR Gold Trust exchange-traded fund in the second quarter, according to regulatory filings. Inflation expectations as measured by the break-even rate for five-year Treasury Inflation Protected Securities fell 12 percent this year.
Bullion has slumped 26 percent this year to $1,245.45 an ounce in London, reaching $1,236.88 yesterday, the lowest since July 9.
Hedge funds and other money managers have cut their net- long positions in gold to 55,456 futures and options as of Nov. 12, according to the latest data from the U.S. Commodity Futures Trading Commission. The holdings are down 48 percent this year.
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