Hedge fund manager and gold bull John Paulson made headlines this week after regulatory filings revealed he cut his stake in the largest bullion-backed ETF by more than half in the second quarter.

However, Paulson offset much of the sale by buying gold swaps in the over-the-counter market, the Financial Times reports, sourcing a person familiar with the matter.

Paulson & Co. held 10.2 million shares of SPDR Gold Shares (NYSEArca: GLD) at the end of the second quarter compared with 21.8 million shares at the end of the first quarter, according to a 13F filing with the Securities and Exchange Commission released Wednesday. [Paulson Slashes GLD Stake]

It was the first time Paulson pared his GLD position since the fourth quar4ter of 2011. GLD currently holds nearly 913 metric tons of gold valued at $40.2 billion. The gold ETF has seen its assets fall in 2013 year due to outflows and a 19% year-to-date decline in the precious metal’s price.

“Paulson & Co.’s decision to shift a chunk of its gold holdings out of the ETF and into the OTC market reflects the relative costs of the two,” the FT reports.

GLD charges an expense ratio of 0.40%.

Full disclosure: Tom Lydon’s clients own GLD.

The opinions and forecasts expressed herein are solely those of John Spence, 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.

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