Paulson & Co more than halved its stake in SPDR Gold Trust, the world's biggest gold-backed exchange-traded fund, in the second quarter, when the bullion price lost nearly a quarter of its value.
The prominent U.S. hedge fund, led by longtime gold bull John Paulson, owned 10.2 million shares in the ETF on June 30, compared to 21.8 million shares on March 31, a filing with the U.S. Securities and Exchange Commission showed on Wednesday.
(Read more: Paulson's gold fund plunges 65% through June)
That marks the first time Paulson cut his gold ETF stake since the fourth quarter of 2011.
In addition, Paulson also dissolved his stake in Barrick Gold, the No. 1 gold mining company.
Investors pay close attention to the quarterly filings by Paulson and other notable hedge-fund managers because they provide the best insight into whether the so-called "smart money" has lost faith in gold as a hedge against inflation and economic uncertainty.
(Read more: Is sentiment toward gold shifting again?)
Their massive stakes in SPDR Gold Trust, backed by 400-ounce physical gold bars, also have tremendous influence in gold prices as redemptions in the ETF require selling the metal in the open market.
SPDR Gold Trust held 968.3 tonnes of gold at the end of the second quarter, down 252.6 tonnes, or 21 percent, from the first quarter.
"Paulson got out of half of his position, who's to say he's not going to get out of his other half over the next three months," said Comex gold options floor trader Jonathan Jossen.