On the afternoon of Monday, August 21, US Treasury Secretary Steven Mnuchin, Senate Majority Leader Mitch McConnell, Kentucky Governor Matt Bevin, and Kentucky Congressman Brett Guthrie took a visit to the vault of the US Mint’s gold depository in Fort Knox, Kentucky, a vault which, according to the US Treasury, holds gold bars containing 147,341,858 fine troy ounces of gold (4583 tonnes of gold).
The trip was notable in that it is one of the rare occasions in history that a US political/congressional delegation has ever visited the Fort Knox depository, and Mnuchin is now only the 3rd treasury secretary ever to make this visit.
The trip was also notable in that unlike previous political excursions to the vault, the Mnuchin-led visit was very low-key, it was announced to the media and public at extremely short notice, and there is no evidence that any media representatives participated, or at least if they did, they have kept very quiet about it.
In contrast, the previous congressional visit to the Fort Knox depository in September 1974 was heavily publicised in advance, was accompanied by 100 news reporters and photographers, and it even documented the visit via photographs and film which were released to the public.
Mnuchin’s visit to the vault merely appears to have taken the form of a quick peek into one of the cramped vault compartments within the Fort Knox vault, and therefore can only be seen as an odd PR stunt whose real intent remains unclear, which does nothing to improve the transparency of the notoriously secretive gold depository, and which on balance has now re-opened scrutiny on how much gold is, or is not, actually stored in the compartments of the Fort Knox vault.
The trip to the Fort Knox vault was only announced by Mnuchin on Monday morning, August 21 (the morning of the Fort Knox visit) during a speech to the Chamber of Commerce in Louisville, Kentucky, which Mnuchin and Mitch McConnell were attending.
As Grace Schneider, a business reporter for the Louisville, Kentucky based Courier-Journal tweeted that morning:
So Mnuchin announced the visit literally a few hours before it took place. Fort Knox is located about 40 miles south-west of Louisville. In his Monday morning speech at the Chamber of Commerce, the Washington Examiner reports that Mnuchin made the bizarre comment that “I assume the gold is still there”. McConnell, at the same time, quipped that “we’re going to find out”. Mnuchin’s comment is bizarre because as US Treasury Secretary, he is top official of the US Treasury.
The US Treasury owns the gold in Fort Knox. The US Mint is just the custodian. The Director of the US Mint and all other senior officials report to Mnuchin. At any time, Mnuchin can get a full and complete high-level briefing on the real status of the US gold reserves. He can also get a full de-briefing on the extent to which the US gold reserves have been audited over the years – or not audited as the case may be. To say that he assumes the gold is still there shows either a flippant view of the expected accountability of a US Treasury Secretary, or else a disregard for the responsibility to which the US public has entrusted him.
It’s not clear whether any journalists actually accompanied the politicians on last Monday’s visit to the Fort Knox depository. An article by an AP journalist from Kentucky named Adam Beam was published on August 22, the day after the visit to the Fort Knox depository.
Beam, based in Frankfort, Kentucky is listed as a Kentucky Statehouse reporter for AP, so would presumably, due to this role, be well-known in Kentucky political circles and would have privileged access to the Mnuchin & Co delegation. AP’s Beam wrote that:
“Inside the famed vaults at Fort Knox, Senate Majority Leader Mitch McConnell held a 27-pound gold bar in his hands Monday as part of the first civilian delegation to see most of the country’s bullion reserves in more than 40 years.”
But AP’s Beam also wrote in the same article that:
“in an interview, McConnell said he could not say much about the visit for security reasons”
suggesting that Beam may not have been on the actual visit to the vault, because if he was, he would have no need to interview McConnell and could have recorded the vault details himself. if the AP Kentucky Statehouse reporter wasn’t even on the visit, what hope was there for other reporters?
As far as I can see from related coverage, there are no photos of any of the delegation either inside the depository. This would suggest that there were no media photographers nor camera people present inside the vault. For such a historic trip, this is itself quite bizarre. Until that is, you realize that in 1978, the US Mint made the internal plans and structures of Fort Knox classified, which effectively bans any photography or filming from inside the depository.
Only One Compartment Viewed
The same AP article quoted Kentucky Governor Matt Bevin as saying that [Fort Knox] “officials had to cut a seal to open the vault for them“. What Bevin means is that the seal on the door of one of the compartments in the vault was cut so that they could open the door to the compartment. According to the US Mint, Fort Knox stores US Treasury gold bars in 13 compartments within the Fort Knox vault. See BullionStar article “Second Thoughts On US Official Gold Reserves Audits” for details.
By opening just one of the 13 compartments for Mnuchin & Co to peer into, that leaves 12 of the supposed gold storage compartments that were not opened. Still, this didn’t stop Mnuchin stating on Twitter that “Glad gold is safe“. This is a ridiculous statement from a US Treasury Secretary when you consider what the actual visit consisted of, and it would be remiss of the US public to put any trust in it.
Kentucky Governor Matt Bevin also said something similar in a radio interview following the vault visit, i.e. that the delegation only saw a subset of the supposed gold. Interviewed by Newradio 840 WHAS, and quoted by televison channel WHAS 11, Governor Bevin said:
“I didn’t see every bit of it [the gold], but the amount that I saw was impressive”
The US Treasury Secretary takes a quick look into one of 13 compartments in the vault and says “Yep, the gold is safe, it’s there“. Imagine a commercial gold vault operating on the basis of how Fort Knox operates. It couldn’t. I have been in BullionStar’s precious metals vault in Singapore. I have looked around. There are a lot of gold bars, silver bars, gold coins and silver coins. But I couldn’t say based on a quick casual observation that ‘yep, all the gold and silver is there’.
That’s why there is a rigorous inventory system at BullionStar, and that’s why BullionStar employs a transparent multi-layered auditing system comprising 5 different audit schemes that are all accessible to customers. To ensure that at any given time, both BullionStar staff and customers know exactly what is inside the BullionStar vault.
But the US Treasury seems to think its sufficient that a quick unrecorded trip by 4 US political insiders can somehow instill confidence that all the gold that is claimed to be in Fort Knox is actually there. In case readers may think BullionStar is being unfair to the US Treasury, its worth noting that there have been many articles published on the BullionStar website by Koos Jansen that highlight the myriad of inconsistencies about the supposed gold reserves stored at Fort Knox and US government auditing of said gold reserves. See for example:
As a freebie trip for 4 select political insiders, last Monday’s trip to Fort Knox was undoubtedly a memorable one for them. In the same radio interview Bevin said that:
“This is like the mother of all field trips. This is pretty cool”
But as a validation and verification of over 56% of the supposed US Official Gold Reserves, the visit was a complete farce. Announced the morning it took place. No evidence that any media were allowed to participate. Only peeked into one of the 13 storage compartments. And then to round it off, Mnuchin (an ex Goldmanite) tweets that ‘Glad gold is safe“. You couldn’t make this up. And finally, no mention of the fact that most of the gold bars even supposedly stored in Fort Knox are low purity ‘coin bars’ made from melted down gold coins. In fact, of all the gold bars reported to be held within the US Gold Reserves, only 16% of these bars are of LBMA Good Delivery size and purity range.
Infographic website Visual Capitalist recently published an eye-catching infographic on behalf of Sprott Physical Bullion Trusts which featured 4 well-known billionaire investors and their supposed investments in gold. The infographic is titled “Why the World’s Billionaire Investors Buy Precious Metals” and can be seen here.
The 4 investors profiled in the infographic are:
Jacob Rothschild (Lord), chairman of London-based investment trust RIT Capital Partners Plc
David Einhorn, president of Manhattan-based hedge fund firm Greenlight Capital
Ray Dalio, chairman and CIO of hedge fund firm Bridgewater Associates, Westport (Connecticut)
Stanley Druckenmiller, chairman and CEO of Manthattan-based Duquesne Family Office (and formerly of Duquesne Capital Management)
Overall, four very famous investors, and four names that should at least be vaguely familiar to almost anyone who has a passing interest in financial markets and investing.
For each of the 4 billionaires, the Sprott infographic provides a few quotes about their views on gold and then moves on to record their recent ‘Moves’ into ‘gold’, or in some cases their recent readjustments of existing ‘gold’ exposures.
However, the trouble with this infographic is that although it’s visually appealing, nowhere does it mention how these famous investors achieve their exposures to ‘gold’, i.e. what form their gold investments take.
This is something which is also regularly bypassed in financial media articles, especially those published by Bloomberg, articles which refer to hedge fund managers such as Druckenmiller, or John Paulson, or Ray Dalio buying ‘gold’, but which all too often are too lazy to do basic research into the actual trades that these hedge fund managers execute to acquire their positions in ‘gold’ and whether these positions are actually in real physical gold or in some form of synthetic or derivative or paper gold.
In fact, the first comment posted on the Visual Capitalist website under said Sprott infographic when it was published asks exactly this question:
“I’d like to know if they are holding physical bullion, presumably in guarded safe vaults, or just paper.”
Given that the infographic is ‘Presented by’ Sprott Physical Bullion Trusts, one might assume that Rothschild, Einhorn, Dalio and Drukenmiller are all investing in physical bullion.
But are they? This is the question I set out to answer and which is documented below. Some of my findings may surprise you.
The Rothschilds: Jacob & RIT Capital Partners
First port of call, the Rothschilds of St James’s Place in London. Given that the Rothschilds are probably the richest family in the world and have been involved in the gold market for hundreds of years, you might assume that the family of the Five Arrows knows a thing or two about the difference between real gold bars and paper gold. And presumably they do. However, no one seems to have told this to the day-to-day managers of RIT Capital Partners Plc, the Rothschild controlled investment vehicle quoted in Sprott’s infographic.
Investment trusts are actually public limited companies (Plcs) which are structured as closed-ended investment vehicles. These vehicles issue a certain number of shares that can then be publicly traded. RIT Capital Partners plc, formally called the Rothschild Investment Trust (hence the name RIT), trades on the London Stock Exchange. Jacob Rothschild (The Lord Rothschild) is chairman of RIT Capital Partners Plc.
As a publicly traded vehicle, RIT Capital Partners Plc publishes annual and half-yearly reports, and is therefore more transparent than its hedge fund brethren. RIT’s latest report, an annual report for year-end 2016, was published on 28 February 2017.
Strangely, although the Sprott infographic was only published on 7 June 2017, it quotes not from the annual report for year-end 2016 but from RIT’s half-yearly report to 30 June 2016, which was published on 15 August 2016.
The Sprott infographic states:
“In a 2016 shareholder update [Jacob] Rothschild outlined bold changes to the RIT Capital Partners’ portfolio, including…increased exposure to gold and precious metals to 8%”
Similarly, in the RIT Chairman’s Statement (page 2) of the 30 June 2016 report, Jacob Rothschild said “We increased gold and precious metals to 8% by the end of June.”
Glancing at either the Chairman’s statement or the Sprott infographic, you might think ‘ok, so RIT holds (or held) 8% of its portfolio in gold and precious metals’. However, this is not the case, a fact which becomes clear when we look at the Investment Portfolio (holdings) of RIT that are detailed in the same report.
RIT is a global investment fund whose holdings span equities, hedge fund investments, private investments, real assets, credit, and bonds. It’s ‘gold’ and ‘precious metals’ holdings are listed under ‘Real Assets’. The entire RIT portfolio is worth £2.73 billion.
The Real Assets section of the RIT report to 30 June 2016 (on page 6 of the report, page 8 of the pdf) lists relevant gold-related line items as:
“BlackRock Gold & General Fund”, described as “Gold and precious metal equities”, valued at £22.9 million, and representing 0.9% of the NAV, with a fund weight of 0.83%
“Gold Futures” with a description “Long, 6.0% notional“, valued at £7.6 million, represents 0.3% of the NAV
“Silver Futures with a description “Long, 1.2% notional” valued at £7.6 million, representing 0.0% (rounded) of the NAV
These are the only gold-related investments in the entire RIT portfolio. Therefore, could this 8% that Jacob Rothschild refers to as “we increased gold and precious metals to 8% by the end of June” be a combination of a 6% notional long on gold futures, a 1.2% notional on long silver futures, and a 0.8% fund weight in gold mining equities through the BlackRock Gold & General Fund holding?
In short, the answer is Yes.
Firstly, looking at the BlackRock Gold & General Fund, this is a UCITS equity fund which exclusively invests in the shares of gold and silver mining companies such as Newcrest, Newmont, and GoldCorp and which is benchmarked against the FTSE Gold Mining Index (an equity index). However, the BlackRock website reminds us that “The Fund does not hold physical gold or metal.” Like all equity investments, this fund exposes its holders to equity risk, currency risk, sectoral risks (in this case the mining sector), possible gold hedging risks, and the general corporate risks that come with stock specific investing in any publicly quoted company, some of which cannot be diversified through portfolio investing.
Next up are the precious metals futures line items. In investment portfolios, notional is literally the gross exposure of a position. In this case, the RIT portfolio being long 6.0% notional in gold futures just means that the portfolio’s notional exposure to gold (via the gold futures position) represented (on 30 June 2016) an amount which was 6.0% of the total (gross) exposure of the portfolio. This is also a leveraged position since it was acquired via the purchase of exchange traded futures and the maintenance of these futures via margin. The amount reflected in the NAV for this position just refers to the margin.
I also checked with RIT investors relations as to whether Jacob Rothschild, when he stated that RIT holds gold, was actually referring to these gold futures positions. RIT investor relations responded:
“Yes, we do refer to long gold futures exposure as “holding gold”. We take this view since we are confident that gold futures are acting as a suitable proxy for gold both from a regulatory perspective and in terms of where we are in the cycle.
However, it should be clear to all that holding gold futures is not the same thing as holding vaulted physical gold. Gold futures may provide exposure to the US Dollar price of gold, but that’s about it, and even if they can be theoretically exercised into physical gold on the COMEX or ICE platforms, no one uses them for this purpose. For example, only 0.04% of COMEX gold futures contracts result in physical delivery each year.
Gold futures also entail exchange risk, risk of not being able to exercise for delivery, margin risk, forced cash settlement risk, etc etc. Gold futures are also derivatives that can come into existence in massive quantities as long as there are counterparties to take the other side of the futures trades.
Allocated physical gold on the other hand is an asset which exists in limited quantities, has no counterparty risk, has intrinsic value and has been used as money and as a store of value for thousands of years.
The “regulatory perspective” that RIT refers to just seems to mean that the fund’s exposure ticks various compliance boxes and is an acceptable security from a compliance and regulatory perspective.
The “where we are in the cycle” phrase probably refers to the interest rate cycle in terms of interest rate movements, inflation, real interest rates etc, but surely this is irrelevant because if you really believe that gold futures prices are a perfect proxy for gold prices, then the existence of a “cycle” and the phases of such a cycle become irrelevant to the investment decision?
In summary, it should be clear that RIT Capital Partners Plc does not hold any gold or other precious metals, because it merely holds gold futures and units in a BlackRock fund which itself only holds gold and silver equities (common shares) and which does not hold physical gold.
Just for completeness, let’s turn to the latest annual report from RIT for year-end 2016 that Sprott did not refer to. Has anything changed compared to 30 June 2016? At year-end 2016, according to Jacob Rothschild:
“We continue to hold gold and gold mining shares amounting to 6% of the portfolio.“
Therefore, by the end of 2016, by RIT’s logic, it now had a 6% exposure to gold (and the exposure to silver futures had disappeared). However, as per the 6 month earlier period, this was really a) exposure to the US dollar price of gold via gold futures and b) an exposure to the common equity of publicly-traded gold mining companies through the BlackRock fund investment.
In the Real Assets section of the RIT annual report (page 13 of the report, page 15 of the pdf), it lists:
“BlackRock Gold & General Fund”, with a description “Gold and precious metal equities” valued at £20.3 million, representing 0.9% of the NAV, and with a fund weight of 0.7%
“Gold Futures” with a Description “Long, 5.7% notional” representing (0.2%) of the NAV
Again, the 6% Rothschild reference includes the 5.7% long notional on gold via the gold futures, the BlackRock fund with a weight of 0.7%, and possibly the (0.2%) NAV (margin), which altogether net to approximately 6% when rounded down. Since 8% sounds better than 6%, Sprott may have chosen to reference the 30 June 2016 RIT report and not the more recent 30 December 2016 RIT report as this would make Rothschild appear more bullish on gold.
David Einhorn and Greenlight Capital
Hedge funds by their nature are very secretive, and because they are private pools of capital, they have no obligation to report detailed holdings even to their clients, let alone to the general public. Some of the justifications for hedge fund secrecy include preventing other trading parties adversely trading against them and preventing competitors replicating their positions. Note, hedge funds still have to report equity holdings to the US SEC and they do this via their quarterly 13F form submissions, which can be viewed on the SEC EDGAR website about 6 weeks after quarter end.
Sometimes hedge fund stars will drop hints about some of their positions or engage with the financial media, but this is mainly to talk their positions and trading books up. Often however, the “partner letters” (similar to shareholder letters) that hedge fund partnerships send to their clients / investors will give some indication as to their positions and asset allocations, and for whatever reason, some of these letters seem to make it into the public domain pretty quickly. Note that most hedge funds are established as Limited Liability Companies (LLCs), a structure which supports the partnership model.
Following Jacob Rothschild, next up on the Sprott infographic is hedge fund manager David Einhorn and his Greenlight Capital hedge fund firm. Greenlight, as a hedge fund firm, runs a series of funds that invest in equity, debt etc but also include global macro and that are known as the “Greenlight Capital funds” a.k.a. “The Partnerships”. There are at least 6 funds in this group, maybe more.
The Sprott infographic refers to a recent gold-related ‘Move’ that Einhorn that made as follows:
“In early 2017, Einhorn mentioned on an earnings call that he was:…Keeping gold as a top position”
“Gold remains a long-term position with a thesis that global fiscal and monetary policies remain very risky”
So we can assume that Einhorn maintains a gold exposure of some sort. Since there was no information in the above partner letter as to what exactly Greenlight refers to as a gold position, and nothing that I could find on the web, I did what any junior Bloomberg reporter should but doesn’t do, and shot off an email to Greenlight asking how Greenlight Capital attains its long gold exposure? Surprisingly, or maybe not, within about 20 minutes Greenlight answered with a short and sweet one-liner:
“We hold physical allocated gold in all our funds.”
This response came from the top of the Greenlight tree, close to Einhorn. Hint David Einhorn only follows three accounts on Twitter, one of which is Donald Trump another of which is the Einhorn Trust. So now we know that at least one major hedge fund firm holds physical allocated gold.
On a side note, Greenlight also offers two funds called Greenlight Capital (Gold), LP and Greenlight Capital Offshore (Gold), Ltd. These two funds actually offers investors a gold class which denominates investments in that class in gold rather than USD. This is similar to a USD denominated fund offering shareholders a EUR or CHF class, the only difference being that this class is in gold.
Ray Dalio and Bridgewater
Bridgewater Associates, based in Westport in Connecticut, runs some of the largest and most well-known individual hedge funds such as the global macro Pure Alpha as well as other well-known funds called ‘The All Weather’ and ‘Pure Alpha Major Markets’. Ray Dalio is founder, chairman and chief investment officer (CIO) of Bridgewater.
In the Sprott infographic, the gold ‘Move’ which they chose to highlight Dalio for was that:
“In 2016, Dalio said it is prudent to have a ‘well-diversified portfolio’ that is 5-10% gold”
However, unlike the other investors profiled, i.e. Rothschild, Einhorn, and Druckenmiller, who had investment decisions attributed to them that involved taking or extending long positions, there is nothing, at least in the infographic, that refers to Dalio taking on or amending a gold position.
“And so gold is one of the currencies. So we have dollars, we have euros, we have yen and we have gold.”
“Now, it [gold] doesn’t have a capacity — the capacity of moving money into gold in a large number is extremely limited.”
“I think … there’s no sensible reason not to have some — if you’re going to own a currency, … it’s not sensible not to own gold”
“I don’t want to draw an inordinate amount of attention to gold”
“a certain limited amount, at least passably, should be in gold, just like you would hold a certain amount in cash”
“Now, it depends on the amount of gold, but if you don’t own, I don’t know, 10 percent in — if you don’t have that and then it depends on the world, then you — then there’s no sensible reason other than you don’t know history and you don’t know the economics of it.”
Dalio frequently, in various forums, demonstrates his understanding of the historical importance of gold in the monetary system. Based on the language that Dalio uses about capacity of the gold market and his appreciation of the history of gold, my hunch is that Bridgewater does hold physical gold in a similar manner to how Greenlight Capital holds gold.
Although it is quite tricky to contact Bridgewater, I did manage to find Dalio’s email (somehow or other) and like an aspiring Bloomberg reporter (or not), I shot off an email to Dalio asking:
“DoesBridgewater hold physical gold in its funds (e.g. Pure Alpha, All Weather, and Pure Alpha Major Markets) or some other type of long gold exposure?”
The same day, I received back an automated response:
Message from "Ray Dalio"
I recognize from your email address that this is the first message I have received from you since Bridgewater Associates began using Sender Address Verification (SAV).
Your message is very important to me. Like you, we are very concerned with stopping the proliferation of spam. We have implemented Sender Address Verification (SAV) to ensure that we do not receive unwanted email and to give you the assurance that your messages to me have no chance of being filtered into a bulk mail folder.
By pressing REPLY and SEND to this message your original message will be delivered to the top of my inbox. You need only do this once and all future emails will be recognized and delivered directly to me.
However, after replying as per the instructions above using the verification address, there was no further response from Bridgewater. Maybe he is on vacation!
So the jury is still out on how Bridgewater acquires its exposure to gold, assuming that its funds actually have exposure to gold. But my guess is that at least some of Bridgewater’s funds do hold gold, and probably hold real physical allocated gold.
Stanley Druckenmiller and Duquesne
Finally, the Sprott infographic features Stanley Druckenmiller, founder and former chairman and president of Pittsburgh-based Duquesne Capital Management, and also former portfolio manager of Soros’ Quantum Fund. In 2010, ‘Stan’ Druckenmiller wound down Duquesne Capital since he claimed it was becoming harder to deliver consistently high returns, but he continued to manage his own wealth through Duquesne Family Office LLC, which is based out of Manhattan.
According to the infographic, in early 2017 Druckenmiller said:
“Gold was down a lot, so I bought it.”
Stan Druckenmiller, Duquesne
This quote was reported in a 8 February 2017 Bloomberg article which itself was based on a CNBC interview from 7 February:
“I wanted to own some currency and no country wants its currency to strengthen,” Druckenmiller said Tuesday in an interview. “Gold was down a lot, so I bought it.”
As per usual, Bloomberg doesn’t bother to find out or mention what form of gold exposure Druckenmiller was referring to in that interview.
Strangely, Bloomberg says that Druckenmiller bought gold in late December and January having previously sold his ‘gold’ on election night in November when Trump was elected. I say strangely because Druckenmiller is known for getting his US dollar ‘gold exposure’ via the gold-backed ETF the SPDR Gold Trust (GLD) however, the Duquesne Family Office 13F filings with the SEC don’t show GLD activity in Q4 2016 or Q1 2016.
Looking at recent Duquesne Family Office 13F filings which show reportable equity holdings (including GLD since GLD is a listed security and is basically like a share), the last time Duquesne Family Office had a long exposure to the SPDR Gold Trust was in Q1 2016 when it held 2,016,000 call options on the SPDR Gold Trust (Cusip 78463V907) which at the time had a notional exposure of $237.16 million. Druckenmiller had purchased 2,880,000 call options on GLD during Q2 2015 but reduced this to 2,016,000 calls during Q1 2016. Duquesne has not held any SPDR Gold Trust shares or options since Q1 2016.
However, looking at the Duquesne 13F filings for Q3 2016, Q4 2016 and Q1 2017, there are some interesting changes in reported holdings of some gold mining equities over this period.
The timing of Druckenmiller saying that he sold his ‘gold’ on election night in November 2016 and the bought gold in late December 2016 and January 2017 fits very well with the Duquesne trades of selling Barrick Gold and Agnico Eagle so that they appeared in the Q3 13F, but not in the Q4 13F and then reappeared in the Q1 2017 13F. If this is the case, then Druckenmiller’s Duquesne does not hold gold but holds gold mining equities, and Druckenmiller’s recent references to buying gold are really references to holding common shares in publicly-traded gold mining companies.
Duquesne, however, could hold other ‘gold exposures’ such as gold futures or even real physical allocated gold. But due to the non-obligation of these investment pools to report holdings, this is unclear.
I also sent an email to Stan Druckenmiller at his Duquesne address, asking him:
“Does Duquesne Family Office hold physical gold as part of its exposure to gold within its investments, or is the exposure some other type of long gold exposure such as the gold-backed ETF GLD?”
However, as of the time of writing, Druckenmiller has not responded.
Druckenmiller’s gold exposure via GLD calls between Q2 2015 and Q1 2016 also deserves some commentary. Readers of this website will know that holding a gold-backed ETF such as GLD is not the same as owning real physical gold. Although the Trust behind GLD holds gold bars, GLD units just provide exposure to the US dollar price of gold and there is no conversion option into real gold. With GLD, the holder is a shareholder and not a gold holder. There are many other concerns with GLD, all of which are documented on a BullionStar infographic.
However, Duquesne’s ‘exposure’ is even one more step removed from gold since it was in the more of a derivative (call option) on an underlying (GLD) which itself does not provide ownership of any gold to the holder. So in some ways this could be called a second order derivative.
Paulson & Co
Although Sprott’s infographic doesn’t feature John Paulson of hedge fund firm Paulson & Co, maybe it should have. However, on second thoughts maybe not, because Paulson & Co is currently the 6th largest institutional holder of SPDR Gold Trust (GLD) shares, which as explained above, is not the same as owning real physical gold. According to its latest 13F filing, Paulson & Co holds 4,359,722 GLD shares worth a sizeable $500 million.
Paulson also launched a specific gold fund in 2010 which is now called the PFR Gold Fund, named after Paulson, and the two managers who used to run the fund, namely, Victor Flores and John Reade, hence the PFR. Reade has now left Paulson & Co, and moved to the World Gold Council (WGC), which derives the majority of its revenue from…wait for it….the SPDR Gold Trust, since WGC’s 100% owned subsidiary World Gold Trust Services is the sponsor of the GLD.
RIT Capital Partners Plc claims to hold gold but really holds a) gold futures which provide notional long gold exposure and b) a BlackRock fund which invests in gold mining shares.
Greenlight Capital holds allocated gold in all of its hedge funds (and they are good about replying to emails).
Bridgewater Associates probably holds gold exposure across at least some of its funds. Given Ray Dalio’s grasp of the importance of real physical gold, I would be surprised if Dalio’s funds do not hold real physical gold. But Dalio is a hard man to track down, so the jury is still out on this one.
Stan Druckenmiller’s Duquesne Family Office had a large exposure to the SPDR Gold Trust via call options in 2015 and early 2016 but then closed this exposure. Duquesne also invests in gold mining equities Barrick Gold and Agnico Eagle Mines, and this could be what Druckenmiller is referring to when he said he sold and then bought back gold.
Paulson is a big fan of the SPDR Gold Trust, a vehicle which is in no way the same as owning physical gold, because it merely provides exposure to the US dollar price of gold.