Far from selling gold, as some misunderstood from his comments at the World Economic Forum, George Soros has been buying gold as we suspected. In a filing with the US Securities and Exchange Commission, Soros Fund Management owned 6.2 million shares of SPDR Gold Trust, the popular GLD exchange traded fund.
At the Davos World Economic Forum, the famous hedge fund manager reckoned to have made a billion from the devaluation of sterling in late 1992 refused to say whether he was buying gold. But he did describe gold as the ‘ultimate asset bubble’, leaving some headlines concluding Mr. Soros a seller of the yellow metal.
Instead he emerges as a born-again gold bug with a hoard valued at $663 million at the end of 2009. Mr. Soros therefore joins John Paulson among the hedge fund managers to undergo a conversion to gold.
As we thought at the time, Mr. Soros might well hold that gold was the ‘ultimate bubble’ but not necessarily consider it to be one just yet. He is therefore buying in advance of this bubble and putting his money where his logic takes him.
Under the principle of reflexivity that Mr. Soros has long propounded, the actions of players in a market place are self-fulfilling to some extent and compound. That will certainly need to happen if gold is to truly become a bubble asset class.
At present the gold trend line is a neat upward slope and shows none of the parabolic behaviour that would normally indicate a price spike. The one gorilla in the front room right now is an overdue stock market correction that would surely also take gold prices down as it did in late 2008 by 30 percent.
To second-guess Mr. Soros again, and with a little more confidence having gotten his Davos statement right, then he ought to be a buyer on weakness. Building up a sizeable position in any commodity at reasonable prices is never easy, and two-thirds of a billion dollars is already no small holding.
Mr. Soros remains among the biggest market speculators in the world and where he goes others will surely follow.
Disclosure: Author is long gold and silver