uploads///Gold miners vs SP

A Look at Ray Dalio’s and John Paulson’s Gold Bets


Aug. 17 2018, Updated 4:05 p.m. ET

Gold miners lose favor

Like positions in the SPDR Gold Shares ETF (GLD), institutional holdings in the VanEck Vectors Gold Miners ETF (GDX) fell sequentially during the second quarter. We discussed in the previous article how gold prices fell in Q2 2018. While gold miners are usually a leveraged play on gold prices, they gained 1.5% on average in the second quarter as gold fell.

The break in the relationship was temporary, and miners have resumed their descent as gold prices weaken. GDX has fallen 20% year-to-date, while GLD has fallen 10%.

Some major gold miners, including Newmont Mining (NEM) and Barrick Gold (ABX), made some merger and acquisition decisions at the peak of the commodity cycle. These decisions resulted in high debt, and the miners lost favor among institutional investors.

Most of these investments were subsequently written off and as they were not economical at lower precious metal prices. Moreover, due to high gold prices, miners started targeting more growth at any cost, which increased their unit costs.

Most of these concerns have now been taken care of, and these companies have emerged as much leaner and more profitable organizations. However, they may need to demonstrate operational sustainability and consistency to renew investor interest.

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Gold stock bets

As reported by Fintel, John Paulson’s fund has exposure to Agnico Eagle Mines (AEM), AngloGold Ashanti (AU), IAMGOLD (IAG), and Randgold Resources (GOLD), among others. During the second quarter, Paulson decreased the fund’s stakes in IAG and GOLD while keeping its holdings in AU unchanged.

Bridgewater Associates has maintained its exposure to the precious metal mining sector through AEM, AU, Goldcorp (GG), B2Gold (BTG), Barrick Gold (ABX), Freeport-McMoRan (FCX), Yamana Gold (AUY), and others. Soros Fund Management has maintained zero gold exposure since exiting its position in ABX in the fourth quarter of 2016. For more on gold’s outlook, read Why the Risk-to-Reward Ratio Could Favor Gold Bulls Now?


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