Hedge fund managers are using the world’s largest gold exchange traded fund (ETF) to get their gold exposure, and they’ve got some pretty big stakes in the fund.

Eton Park Capital Management LP earlier this week showed it had joined a list of hedge funds that are buying shares of SPDR Gold Shares (NYSEArca: GLD). It’s a stamp of approval from some of the world’s most respected money managers, and it could prove to be a lure for other investors. GLD is backed by about 1,300 metric tons of the precious metal. [Tom Talks Gold ETFs on MarketWatch TV.]

John Spence for The Wall Street Journal explains that some of the well-known investors include George Soros and John Paulson. They have big holdings in the ETF: Paulson’s position at the end of the second quarter was $4 billion; Eton has $800 million in the fund; and Soros has $600 million. [Why Gold ETFs Were Falling.]

Now that GLD has gotten so large and investment demand for the metal in general is rising, some wonder if gold is really the diversifier it used to be. It’s also raising the question of what happens if gold and/or equities crash.

We can only speculate at this point. One thing that’s for certain is that all gold investors should have an exit strategy in place to protect themselves on the downside. One thing you can do is sign up for alerts to be notified when a key trading signal is reached. [Gold ETF Slashes Fees and Sees Results.]

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.