I
doubt if “stimulus” is the reason Soros is buying gold; no doubt
he is hurrying for the exit.
Soros
Buying Gold as Record Prices Seen on Stimulus
20
Novemberl, 2012
Gold’s
12-year rally, the longest in at least nine decades, is poised to
continue in 2013 as central bank stimulus spurs investors from John
Paulson to George Soros to accumulate the highest combined bullion
holdings ever.
Central
banks from Europe to China are pledging more steps to boost growth,
raising concern about inflation and currency devaluation. Investors
bought 247 metric tons through ETPs this year, exceeding annual U.S.
mine output.
The
metal will rise every quarter next year and average $1,925 an ounce
in the final three months, or 11 percent more than now, according to
the median of 16 analyst estimates compiled by Bloomberg. Paulson &
Co. has a $3.66 billion bet through the SPDR Gold Trust, the biggest
gold-backed exchange- traded product, and Soros Fund Management LLC
increased its holdings by 49 percent in the third quarter, U.S.
Securities and Exchange Commission filings show.
Central
banks from Europe to China are pledging more steps to boost growth,
raising concern about inflation and currency devaluation. Investors
bought 247.5 metric tons through ETPs this year, exceeding annual
U.S. mine output. While both sides said talks Nov. 16 between
President Barack Obama and Congress over the so-called fiscal cliff
were “constructive,” the Congressional Budget Office has warned
the U.S. risks a recession if spending cuts and tax rises aren’t
resolved.
“We
see gold as a hedge against the follies of politicians,” said
Michael Mullaney, who helps manage $9.5 billion of assets as chief
investment officer at Fiduciary Trust in Boston. “It’s a good
time to garner some protection in portfolios by having some real
asset like gold.”
Longest
Streak
Gold
advanced 11 percent to $1,728.85 in London this year, headed for a
12th consecutive annual gain, the longest streak in data compiled by
Bloomberg going back to 1920. Prices reached a record $1,921.15 in
September 2011. The Standard & Poor’s GSCI gauge of 24
commodities slipped 0.3 percent and the MSCI All- Country World Index
(MXWD) of equities climbed 8.2 percent. Treasuries returned 2.7
percent, a Bank of America Corp. index shows.
Bullion
held through ETPs, the first of which listed in 2003, reached a
record 2,604.2 tons yesterday, valued at $144.9 billion. That exceeds
the official reserves of every nation except the U.S. and Germany,
World Gold Council data show. The SPDR Gold Trust (GLD) alone holds
1,342.2 tons.
Soros
increased his investment in the trust to 1.32 million shares in the
third quarter, the most since 2010, a Nov. 14 SEC filing showed. The
stake, with each share representing about a 10th of an ounce, is
valued at $221.4 million. Prices advanced 60 percent since January
2010, when Soros called gold the “ultimate asset bubble.” Michael
Vachon, a spokesman for the 82-year-old who made $1 billion breaking
the Bank of England’s defense of the pound in 1992, declined to
comment.
Official
Reserves
Paulson,
who became a billionaire in 2007 by wagering against the subprime
mortgage market, owns 21.8 million shares in the SPDR Gold Trust,
making him the biggest shareholder, a Nov. 15 SEC filing showed. The
56-year-old raised his stake by 26 percent in the second quarter and
his holding of about 66 tons exceeds the official reserves of nations
from Brazil to Bulgaria to Bolivia.
The
New York-based hedge fund company reduced its investments in
Anglogold Ashanti Ltd. (ANG) and Gold Fields Ltd., the third- and
fourth-biggest producers. Armel Leslie of Walek & Associates, a
spokesman for Paulson’s fund, declined to comment.
Paul
Touradji’s Touradji Capital Management LP sold all of its 82,000
shares in the SPDR Gold Trust in the third quarter, according to an
SEC filing. Lone Pine Capital LLC, the hedge fund run by Stephen
Mandel Jr., cut its stake by 31 percent to 2.6 million shares, and
Dan Loeb’s Third Point LLC lowered its bet by 10 percent to 130,000
shares, filings showed last week. Officials from all three companies
declined to comment.
Nine
Strategists While
some investors expect stimulus to devalue currencies, the median of
nine strategist estimates compiled by Bloomberg show the U.S. Dollar
Index, a measure against six major trading partners, will average
82.8 next year, from 80.9 now. Steven Englander, Citigroup Inc.’s
head of G-10 strategy, said in an interview this month that the
currency market is signaling it isn’t yet convinced the Federal
Reserve will fulfill its pledge to pump record amounts of cash into
the economy through 2015.
Third-quarter
demand for gold fell 11 percent, the most since 2009, as China’s
slowing growth curbed purchases, the London-based World Gold Council
said Nov. 15. India, the biggest buyer in the quarter, consumed 24
percent less in the year’s first nine months as bullion priced in
rupees reached a record in September. The Washington-based
International Monetary Fund cut its 2013 forecast for world growth
twice since July, to 3.6 percent.
Inflation
Adjusted
While
prices rose 25 percent since November 2010, the size of the futures
market, based on contracts outstanding, fell 30 percent, bourse data
show. The metal, down 3.7 percent from this year’s high, has yet to
exceed previous records when adjusted for inflation, with its 1980
record of $850 equal to $2,398 today, data compiled by the Fed Bank
of Minneapolis show.
Hedge
funds and other large speculators pared bets on a rally in futures
traded on the Comex bourse in New York by 29 percent since Oct. 9,
U.S. Commodity Futures Trading Commission data show. They’re still
holding a net-long position of 140,162 futures and options, about 10
percent more than this year’s average, and increased wagers by 7.7
percent last week
.
The
Fed said Oct. 24 it will maintain $40 billion in monthly purchases of
mortgage debt and probably hold interest rates near zero until
mid-2015. The European Central Bank said it’s ready to buy bonds of
indebted nations and the Bank of Japan raised its asset-purchase
program for the second time in two months on Oct. 30.
Quantitative
Easing
Gold
rallied 70 percent as the Fed bought $2.3 trillion of debt in two
rounds of quantitative easing from December 2008 through June 2011.
Investors
buying bullion as a hedge against inflation and a weaker dollar
generally earn returns only through price gains, increasing its
allure as interest rates decline. It rose sixfold since the end of
2000, beating the 34 percent advance in the S&P 500, with
dividends reinvested, and the 91 percent return on Treasuries. The
Dollar Index fell 26 percent.
The
first face-to-face meeting between Obama and leaders from Congress on
the fiscal cliff yielded optimism and few details about how it would
be resolved. The $607 billion of automatic spending cuts and tax
increases is scheduled to take effect in January. U.S. equities and
Treasuries rose Nov. 16 and gold futures were little changed.
Options
Trading
Credit
Suisse Group AG’s Tom Kendall, the most accurate gold forecaster
tracked by Bloomberg over the past two years, sees prices averaging
$1,880 in the fourth quarter next year and UniCredit SpA’s Jochen
Hitzfeld, ranked second, expects $1,950. Deutsche Bank AG’s Daniel
Brebner, the next most accurate, predicts $2,300 in the third
quarter.
Options
traders are also bullish, with the seven most widely held contracts
conferring the right to buy at prices from $1,800 to $2,200 between
November and March, Comex data show.
Central
banks added to reserves for 19 consecutive months through August, the
longest streak since 1964, IMF data show. Nations from Russia to
South Korea to Mexico bought more to bring combined holdings to
31,461 tons, equal to about 18 percent of all the metal ever mined.
Barrick
Gold Corp. (ABX), the world’s largest producer, will report a 41
percent gain in profit to a record $5.04 billion next year, the mean
of 10 analyst estimates compiled by Bloomberg shows. The
Toronto-based company’s shares fell 25 percent this year and will
gain 43 percent in the next 12 months, according to the average of 23
forecasts.
Monetary
Stimulus
Analysts
predict Newmont Mining Corp. (NEM) and AngloGold Ashanti, the
next-biggest, will also report the most profit ever next year.
“It
looks as though global monetary stimulus is likely to continue,
particularly in the wake of growing fiscal austerity,” said Alan
Gayle, a senior strategist at RidgeWorth Capital Management in
Richmond, Virginia, which oversees about $47 billion of assets. “That
puts pressure on the monetary authorities to stimulate the economy
and that will debase the currencies and put a bid under gold.”
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