Thursday, February 18, 2010

George Soros Shows Confidence In Gold With Investment

George Soros, one of the most astute investors in the market, has recently doubled his holdings in a gold-based ETF, even though he has recently referred to a gold bubble. Given the lack of market conditions similar to the 1980's (the last gold bubble), and the strong interest in gold, many agree that the bull market in gold will continue. See the following post from Expected Returns.


From the NY Times, Soros Doubled Gold ETF Investment:
Billionaire investor George Soros' hedge fund more than doubled its bet on the price of gold during the fourth quarter, a portion of the firm's total U.S.-listed equity holdings of $8.8 billion at the end of 2009.

Soros Fund Management owned 6.2 million shares of SPDR Gold Trust -- an exchange-traded fund that owns gold bullion -- at the end of the year worth $663 million. That was up from 2.5 million shares at the end of the third quarter.

Soros and other noted investors like John Paulson have previously touted gold as a hedge against inflation, further economic turmoil or a decline in the value of the U.S. dollar. Last month at the World Economic Forum in Davos, Soros said "the ultimate asset bubble is gold," but he declined to say whether he was investing in the precious metal.
George Soros is undeniably one of the best investors in the world. His truly global and dynamic (i.e. theory of reflexivity) view of markets definitely puts him a step ahead of most fund managers. So when Soros picks up on an investment theme, most people listen.

Much was made of Soros calling gold the "ultimate asset bubble" last month. Gold bears latched onto this statement as evidence of the top being in for gold. Of course he didn't give a time frame for when gold would reach bubble valuations, which led me to believe he was buying. Based on Soros' 4th quarter filings, my hunch was correct.

Central bankers from China and South Korea have made similar statements over that past couple of months, which means they are probably buying as well. After all, they manage billions of dollars in capital- so every dollar they can talk down the gold price, before buying, is substantial.

It bears repeating that gold will not be a bubble until people stop giving you blank stares every time you mention the "barbaric relic." We need to see lines around the block in gold bullion stores across the country like we did in the 1980's. We need gold shares to explode past their all-time highs in short order. We are seeing nothing of the sort yet.

The small money has no clue gold is in a bull market. The big money already has huge physical positions in the yellow metal. Which side do you want to be on?

This article has been republished from Moses Kim's blog, Expected Returns.

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1 comments:

March 7, 2010 at 5:42 AM CrisisMaven said...

A bubble in, say, shares, stocks or commodities happens when people believe it will "go up and up" (and is, as a rule, as with housing recently and "tech" stocks at the beginning of the millenium, again mainly driven by money inflation). Gold in contrast is a hedge against inflation and against looming sovereign defaults. Inflation by definition is the increase in money supply. There's no doubt that this has happened several fold in only two years. So there is inflation. Hence there is no gold bubble, as gold has not appreciated by a tenth even of what the monetary base has expanded!

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