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Soros, Paulson Trading Gold. Should You?

Hedge funds, investors with big names and investment banks traded gold in the second quarter. What can you learn from their trades?
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) -- Investors with big names are are buying and selling gold. So should you?

The most recent 13F filing for the popular gold exchange-traded fund,

SPDR Gold Shares

(GLD) - Get SPDR Gold Shares ETF Report

, revealed that

Eton Park Capital

bought 6.5 million shares in the second quarter while

Paulson & Co.

, the hedge fund founded by

John Paulson

, left its position unchanged at 31.5 million shares.

Paulson & Co. is the largest holder of the GLD and the position has been consistent for more than a year leaving some analysts to speculate that the position is less about being bearish on an economic recovery and more about a hedge against riskier positions.

Paulson also launched a gold hedge fund in which he invested $250 million made up of gold stocks and physical gold. According to recent reports the fund is up 5.7% for the year while gold prices have popped 9%.

Paulson also retained unaltered positions in seven mining stocks ranging from large producers

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AngloGold Ashanti

(AU) - Get AngloGold Ashanti Limited Report

to junior explorers


(NG) - Get Novagold Resources Inc. Report

. The hedge fund did add 500,000 shares of

Gold Fields

(GFI) - Get Gold Fields Limited American Depositary Shares Report


In contrast,

Soros Fund Management

founded by the legendary

George Soros

was actively trading the GLD and gold stocks. Soros unloaded 341,250 shares of the GLD but is still the seventh-largest holder with 5.24 million shares. Soros owns 13 gold stocks and small positions in the

Market Vectors Gold Miners

(GDX) - Get VanEck Gold Miners ETF Report

, a basket of large gold companies, and

Market Vectors Junior Gold Miners

(GDXJ) - Get VanEck Junior Gold Miners ETF Report

, a combination of small miners. The biggest change was in NovaGold in which the fund sold 5.8 million shares.

Eton Park Capital, which was founded by Eric Mindich, a former

Goldman Sachs

partner, along with the GLD also bought shares in

Barrick Gold



Newmont Mining

(NEM) - Get Newmont Corporation Report






(AEM) - Get Agnico Eagle Mines Limited Report


Gold Fields

(GFI) - Get Gold Fields Limited American Depositary Shares Report


The big investment banks like

Morgan Stanley

(MS) - Get Morgan Stanley Report


Goldman Sachs

(GD) - Get General Dynamics Corporation Report


Bank of America

(BAC) - Get Bank of America Corporation Report

, however, seemed to favor the smaller gold and mining ETFs.

Morgan Stanley, perhaps looking to take on more risk, sold 2.3 million shares of the GDX and bought 305,523 shares of the GDXJ thereby becoming its biggest owner.

Goldman Sachs also bought shares of the GDXJ as well as 102,195 shares of the smallest gold ETF,

ETFS Physical Gold Shares

(SGOL) - Get abrdn Physical Gold Shares ETF Report

, making it the second largest holder behind


(JPM) - Get JP Morgan Chase & Co. Report


Schroder Investments

initiated a position in the cheapest gold ETF,

iShares Comex Gold Trust

(IAU) - Get iShares Gold Trust Report

, with 1.74 million shares.

As hedge funds, investment firms and popular investors trade gold the question is should retail investors follow?

Pratik Sharma, managing director at Atyant Capital, believes this recent filing showed big named investors trading gold rather than adopting a buy and hold strategy and he is expecting a price correction to follow.

"The asset class is a bit crowed," says Sharma. "I think the next two to three months is going to be when the committed followers commit and the Johnny Come Latelies go look for different areas."

Scott Redler, chief strategic officer at

, warns of any peer-pressure buying or selling. Redler trades the GLD and frequently tells investors to not chase the stock.

Shares are up 9.1% for 2010 along with gold prices and Redler is selling into strength and waiting for a good technical level to reboot his position.

"I want to see a very shallow pull in. I don't want to see violence up here ... I want to see the institutions stay in there, supporting it ... I want to see

gold prices hover above $1,215/$1,220

before buying more.

For every share an investor owns of the GLD and other gold ETFs, he owns about one-tenth of an ounce of gold. But you don't technically own the metal, argues Dave Fry, founder and publisher of ETF Digest, you own a paper representation of gold.

Fry recommends the IAU for longer-term investors because the fee is cheaper at 25 basis points vs. 40 basis points for the GLD, but he also warns "if you're buying gold, get gold."


(SYMBOL) by Alix Steel in


Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.