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Soros
Gold Action Speaks Louder Than 'Bubble' Words
15
August, 2012
Today's
AM fix was USD 1,594.75, EUR 1,293.60, and GBP 1,016.74 per
ounce.
Yesterday’s AM fix was USD 1,614.50, EUR 1,305.60 and GBP 1,028.34 per ounce.
Yesterday’s AM fix was USD 1,614.50, EUR 1,305.60 and GBP 1,028.34 per ounce.
Silver
is trading at $27.70/oz, €22.65/oz and £17.74/oz. Platinum is
trading at $1,401.25/oz, palladium at $571.75/oz and rhodium at
$1,060/oz.
Gold
dropped $8.70 or 0.54% in New York yesterday and closed at
$1,599.60/oz. Silver climbed higher before retreating to $27.64, but
it then rallied back higher to end with a gain of 0.14%.
Gold
is under pressure today despite the likelihood of more QE from the
FED, ECB and other central banks and despite the very uncertain and
poor macroeconomic outlook.
Positive
US data, retail sales grew for the first time in 4 months, may have
led to gold weakness and scaled back hopes that the US Fed will take
action soon.
On
Tuesday, Gold ETF interest increased to its highest level in nearly a
month at 2,190.583 tonnes showing how investment demand in the gold
ETF is far more ‘sticky’ and long term in nature.
This
means that there is a fundamental pillar of support below the gold
market which did not exist in the 1970’s.
An
important positive development for the gold market is billionaire
financiers George Soros and John Paulson have again increased their
allocations to gold as seen in the latest SEC filings.
George
Soros more than doubled his shares in the SPDR gold trust ETF.
He
increased his position in SPDR Gold to $137.3 million in the second
quarter from $52 million previously. SEC filing for the second
quarter showed Soros Fund Management more than doubled its investment
in the SPDR Gold Trust from 319,550 shares to 884,400 shares at the
end of June.
In
September 2010 (see chart), Soros called gold "the ultimate
bubble" and largely dumped his stake in the ETF before gold
recorded annual gains in 2010 and 2011 and rose to a nominal high of
$1,920.30 per ounce in September.
There
was speculation at the time that he may have sold the SPDR trust in
order to own far safer allocated gold bars.
Another
billionaire investor respected for his financial acumen is John
Paulson and Paulson & Co increased its holdings by 26% by
purchasing an additional 4.53 million shares of the SPDR Gold Trust
to bring entire holding to 21.8 million shares.
It
was the first time Paulson & Co had increased its position in the
SPDR Gold Trust since the first quarter of 2009, when the investment
firm initially acquired 31.5 million shares. It means that Paulson's
$21 billion hedge fund now has more than 44% of the company's assets
allocated to gold.
Paulson,
who became a billionaire in 2007 by betting against the US subprime
mortgage market, lost 23% in his gold fund through July as lower
bullion prices and slumping mining stocks led to losses.
The
increased allocation by Paulson shows that he has much confidence
that his allocation to gold will pay off in the long term.
According
to Bloomberg, Vinik Asset Management, the Boston-based hedge fund
founded by Jeffrey Vinik, who formerly ran the Fidelity Magellan Fund
(FMAGX), cut its entire stake in the gold ETF. On March 30, the fund
held 2.3 million shares, SEC data show. Eric Mindich’s Eton Park
Capital also sold all of its 739,117 shares last quarter, a filing
showed.
Moore
Capital Management LP acquired 120,000 shares of SPDR Gold Trust in
the second quarter, a filing showed yesterday. The hedge fund held no
shares in the gold fund as of March 31. Moore was also aggressive in
selling financial and bank shares such as JP Morgan (JPM), Wells
Fargo and US Bancorp.
Gold
fell 4% in Q2 but the increased allocations show that some of the
smartest money in the world continues to see gold as a buying
opportunity. With the Fed having bought $2.3 trillion of debt in two
rounds of 'quantitative easing' and all major central banks keeping
borrowing costs at a record low gold's fundamentals remain very
sound.
Soros'
recent renewed allocation to gold has been far less trumpeted than
his gold 'bubble' remark and much trumpeted liquidation of gold
holdings in May 2011. Some have suggested that Soros was
misinterpreted regarding his gold bubble remark and may have meant
that gold will in time become the "ultimate bubble".
Alternatively,
Soros wishes to accumulate a large position in gold prior to prices
rising even further and was happy to help dissuade the retail public
from entering the gold market until he owns a significant amount of
gold.
Some
hedge fund managers have been known to talk down an investment while
in the process of accumulating.
It
could simply be that Soros has changed his opinion regarding gold and
does not now view it as a "not safe," "ultimate
bubble". This seems likely as he has warned that there is a real
risk of a euro break up and is on record regarding having deep
concerns regarding the US fiscal situation - both of which are of
course bullish for gold.
Paulson
told clients in February that gold is his best long term bet, serving
as protection against currency debasement, rising inflation and a
possible breakup of the euro.
Given
Soros awareness of financial risk it is likely that he also owns
physical bullion and not just the more high risk shares in the very
public SPDR trust.
Other
highly respected managers such as Kyle Bass, Greenlight Capital's
David Einhorn and Third Point LLC's Daniel Loeb are on record as
favouring more discrete ownership of actual physical gold bullion
bars - in an allocated format in a secure vault.
We
advise our clients – retail, pension and institutional – to do
likewise and own physical gold bullion in the safest way possible.
NEWS
Gold
Fund's Collapse Rattles Poland –
Wall Street Journal
COMMENTARY
Which
Way Will the Pendulum Swing for Gold? -
GoldSeek
Silver
Hoard Near Record High Has Transnational Silver Abusers Concerned –
Silver Vigilante
Ron
Paul – “U.S. Treasury Guilty of Counterfeiting Dollars” –
Gold and Silver Blog
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