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Duquesne Family Office makes $324 million bet on gold

By Michael Finnigan

The family office of billionaire Stanley Druckenmiller, who famously broke the Bank of England with George Soros in 1992, has made a huge gamble on gold in the second quarter, despite being downbeat on the economy.

According to a regulatory filing, Duquesne Family Office paid $324 million for a 2.8 million share position in the SPDR Gold Trust (GLD), the market's largest physical gold exchange-traded fund, just weeks after prices fell to a five-year low.

The filing shows that gold is now Druckenmiller's largest single holding, followed by social networking service Facebook, which sits in second place with 1,872,700 shares, up from 252,000 in the first quarter.

The 62-year-old also purchased 1.28 million shares of gold miner Newmont Mining and 3.6 million shares of copper giant Freeport-McMorcan, suggesting that he could be planning to back precious metals for the long run.

Druckenmiller previously said that when he sees something that really excites him he will "bet the ranch on it” but has made few big moves since transforming his legendary hedge fund Duquesne Capital Management into a family office in 2010.

Duquesne invested in the SPDR Gold Trust shortly before the precious metal dipped in July, pushing the exchange-traded fund down 6.6%. However, the filing reported that Duquesne's equity holdings rose by 87.2% to $1.47 billion during the quarter.

Gold is often seen as a hedge against inflation and Druckenmiller may be trying to call the bottom before prices begin to rise. However, hedge fund manager John Paulson of New York-based Paulson & Co – the second biggest player in the gold market – reduced his position in the second quarter for the first time in two years.

The reason for the entrepreneur's increased stake in precious metals may be reflected in his comments on interest rates. He said in a Bloomberg article in May: “I have no confidence whatsoever that we'll see a rate hike in September or December”, adding that rates are likely stay near zero for the next 10 years.

He also said he was bullish on China despite the country's leaders targeting a mere 7% growth rate this year, which is the lowest growth rate since 1990. 

China boosted its gold holdings to 1,677 tonnes at the end of July and was the biggest buyer of gold in the world. The stock market boom that cut gold demand in the first half of the year has now popped and the recently devalued yuan may encourage investors to return to hard assets.

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