George Soros & $1,500 Gold

September 1, 2010 Inflation, Market Movers, Politics No Comments

Did George Soros create the “big lie” about $1,500 gold, or is he just manipulating the market as he did with the British Pound? The answer to that question is probably way too complex to definitely flesh out at this time, but the truth is it doesn’t matter which way the chips fall, because George Soros is prepared to profit no matter what came first, whether it be the chicken or the egg! No matter how you look at it, gold is going higher and because it is, George Soros & $1,500 gold are inexorably linked.

Let me make one thing perfectly clear, I am not a fan of George Soros. He is to the currency markets what “The Community Organizer In Chief” is to the freedom in the United States: an ideological opportunist that does not care what his actions do to the populace as long as he profits and his power increases.

The Wall Street Journal reported on Feb 17, 2010.

Soros Increased Bet on Gold Last Year

By Devon Maylie

LONDON—Investor George Soros doubled his bet on gold at the end of 2009 amid rising prices, a filing with the U.S. Securities and Exchange Commission showed.

The filing, made late Tuesday for the financial period ended Dec. 31, comes after Mr. Soros made comments during the World Economic Forum in Davos, Switzerland, in late January calling gold an asset bubble. He told media at the time that the low-interest-rate environment creates a condition for bubbles to develop and that gold is the ultimate bubble.

Mr. Soros has said in the past that when he sees a bubble he buys and the gold holdings at the end of 2009 seem to indicate that is what he did. A spokesman for Mr. Soros declined to comment on the filing.

Soros Fund Management reported total holdings of $8.8 billion at the end of the year, up from $6.2 billion on Sept. 30.

As part of that, he increased shares held of theSPDR Gold Trust to 6.2 million, valued at $663 million, as of the end of 2009. That was up from 2.5 million shares at the end of the third quarter.

Gold prices during the final three months of 2009 rose about 22% to a record high of $1,226.30 a troy ounce on the spot market.

The SPDR Gold Trust is an exchange-traded fund that owns physical gold and has become popular with investors because it makes it easier to invest in bullion itself.

Mr. Soros’s SPDR shares account for about 1.7% of SPDR’s 364.1 million outstanding shares.

The Soros fund also held 11,000 call options that would allow it to buy further shares. Soros Fund Management became the fourth-largest institutional holder of the SPDR Gold Trust, surpassed by hedge-fund manager John Paulson’s Paulson & Co., Bank of America Corp. and BlackRock Advisors, said gold-market tracker Goldessential. Paulson & Co. at the end of 2009 held 31.5 million SPDR shares valued at $3.38 billion. The quantity of shares held were unchanged from the end of the third quarter.

The Soros fund also reported holdings in several gold equities. It sold its holdings in AngloGold Ashanti Ltd. of 10,300 shares valued at $420,000. It added 18,300 shares of Barrick Gold Corp. valued at $721,000. It also added 61,500 shares of Freeport-McMoRan Copper $ Gold Inc. valued at $4.938 million and 2.78 million shares of Kinross Gold Corp. valued at $51.097 million.

The fund increased holdings inYamana Gold Inc. to 85,880 shares from 25,000 shares at the end of September.

Mr. Soros has no qualms about scaring the market with bubble talk and then buying the dip he creates! Listen as Victor Sperandeo, in an interview on MartinKronicle.com, a friend of George Soros, explains how it is done.

This reminds me a lot of the Chinese. Say one thing while you are doing another thing. Soros is in the same league with countries that manipulate the gold market with central bank sales. These are major players, so it is probably wise to be looking at what Soros bought. If he knows anything, he knows what is going on inside these companies. Just a thought for you to consider.

Lets now step forward to yesterday and see what is going on with gold now.

Gold Rallying to $1,500 as Soros’s Bubble Inflates

August 31, 2010, 9:30 AM EDT

BloombergBy Nicholas Larkin

Aug. 31 (Bloomberg) — Investors are accumulating enough bullion to fill Switzerland’s vaults twice over as gold’s most- accurate forecasters say the longest rally in at least nine decades has further to go no matter what the economy holds.

Analysts raised their 2011 forecasts more than for any other precious metal the past two months, predicting a 10th annual advance, data compiled by Bloomberg show. The most widely held option on gold futures traded in New York is for $1,500 an ounce by December, or 18 percent more than the record $1,266.50 reached June 21. Holdings through bullion-backed exchange-traded products are already at more than 2,075 metric tons, within 0.1 percent of the all-time high.

“Either a swift economic recovery or further dismal economic performance should bring new buyers into the market,” said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt who was the most accurate forecaster in the first quarter and expects the metal to rise as high as $1,400 next year. “A stronger economy would create more jewelry demand. If the economy stays weak or gets worse, then investors will be looking for a safe haven.”

Investors added to their gold holdings through ETPs for three consecutive weeks, reflecting demand for assets typically favored in times of financial stress. Two-year Treasury yields fell to a record low of 0.4542 percent on Aug. 24 and the yen reached a 15-year high against the dollar the same day. Pacific Investment Management Co., Deutsche Bank AG and Citigroup Inc. have announced or are offering funds or traded instruments designed to guard against sudden market declines.

Swiss Reserves

Buyers accumulated almost 278 tons of gold in 2010 across 10 ETPs tracked by Bloomberg, worth $10.4 billion at this year’s average price. Total holdings are almost twice Switzerland’s official reserves of 1,040 tons, data compiled by the World Gold Council show. ETP holdings reached a record 2,078 tons July 19, data compiled by Bloomberg show.

One of the biggest buyers has been Soros Fund Management LLC, which oversees about $25 billion. George Soros, who made $1 billion breaking the Bank of England’s defense of the pound in 1992, described gold as “the ultimate asset bubble” at the World Economic Forum’s January meeting in Davos, Switzerland. Buying at the start of a bubble is “rational,” he said.

Soros Fund Management sold 341,250 shares of the SPDR Gold Trust, the largest ETP backed by bullion, in the second quarter, according to an Aug. 16 Securities and Exchange Commission filing. That still left a holding of 5.24 million shares, equal to almost 16 tons. Soros declined to comment on the change, through a spokesman.

Accurate Forecasters

Gold may rise as high as $1,500 next year, 21 percent more than the $1,240 traded at 1:45 p.m. in London, according to the median in a Bloomberg survey of 29 analysts, traders and investors. Dan Brebner, an analyst at Deutsche Bank in London who is the most accurate forecaster so far this year, says the metal may reach $1,550.

Bullion gained 13 percent since January, beating an 8.4 percent return on Treasuries, an 8 percent decline in the MSCI World Index of shares and the 10 percent slump in the S&P GSCI Total Return Index of 24 raw materials.

Investors are concerned the recovery is weakening. Sales of new U.S. homes fell to an all-time low in July, the Commerce Department said Aug. 25. The U.S. economy grew at a 1.6 percent annual rate in the second quarter, less than previously calculated, the department said Aug. 27. U.S. growth will slow to 2.8 percent next year, compared with 3 percent in 2010, according to the median of as many as 69 economists’ forecasts compiled by Bloomberg.

‘Fear Another Crisis’

People “fear another crisis and so they will diversify into gold,” said Thorsten Proettel, an analyst at Landesbank Baden-Wurttemberg in Stuttgart, Germany, who was also the most- accurate forecaster in the first quarter. He expects gold to trade as high as $1,350 next year. Anne-Laure Tremblay, an analyst at BNP Paribas SA in London whose forecast was also the best in the period, is estimating a 2011 high of $1,370.

Bullion’s four-fold rally since the end of 2000 has attracted fund managers Eric Mindich and John Paulson. Mindich’s $13 billion Eton Park Capital Management LP bought almost 6.58 million shares of the SPDR Gold Trust in the second quarter, according to an Aug. 16 SEC filing. That’s equal to about 20 tons of gold. Paulson & Co., managing $31 billion, held 31.5 million shares in the SPDR Gold Trust, making it the largest investor, an Aug. 16 SEC filing shows.

Astor Sells

Astor Asset Management LLC, with about $570 million of assets, once had as much as 10 percent of its holdings in the SPDR Gold Trust, according to Bryan Novak, managing director of the Chicago-based company. The firm sold the stake at the end of last year for a profit and now owns silver, copper and a multicommodity ETP.

“We don’t believe we’re heading into a double-dip recession,” Novak said. “Gold carries some risk because a lot of people are piling into the trade.”

A plunge in equities may spur investors to sell their gold holdings to raise cash, he said. The Standard & Poor’s 500 Index dropped 14 percent since this year’s peak on April 26.

Investment demand of 1,901 tons last year exceeded jewelry consumption of 1,759 tons for the first time in three decades, according to London-based researcher GFMS Ltd. That trend continued into the second quarter, with total demand advancing 36 percent to 1,050.3 tons, the WGC in London said Aug. 25.

Newmont Mining

Earnings at Newmont Mining Corp., the largest U.S. gold producer, may increase 47 percent to $1.93 billion in 2010, according to the mean estimate of seven analysts’ forecasts compiled by Bloomberg. The 16-member Philadelphia Stock Exchange Gold and Silver Index advanced 8.7 percent since January.

Bets on gold may pay off even if economic recoveries strengthen. World growth will be 4.6 percent this year, the most since 2007, the International Monetary Fund said July 7. China, the second-biggest bullion buyer after India, will expand 10 percent in 2010, compared with 9.1 percent last year, according to the median of 24 economists’ forecasts compiled by Bloomberg.

Gold imports by India this year may total 600 tons to 625 tons, compared with an estimated 480 tons to 485 tons last year, according to Anjani Sinha, chief executive officer of National Spot Exchange Ltd., the country’s biggest bourse for trading physical gold.

While growth may curb investors’ appetite for gold to protect their wealth, it may also bolster purchases of jewelry, reviving demand that fell to a 21-year low in 2009, according to Jochen Hitzfeld, an analyst at UniCredit SpA in Munich and the best forecaster in the last three quarters. He’s predicting a 2011 high of $1,350.

More Bullish

Analysts are getting more bullish. Their median estimate for next year’s average gold price climbed 6.2 percent since June 16 to $1,247.50, according to 17 forecasts compiled by Bloomberg. That compares with a 2.6 percent gain in silver forecasts, 0.6 percent advance in platinum predictions and a 0.5 percent jump in their palladium outlook.

Gold averaged $1,166.43 since January, heading for a ninth consecutive year of higher average prices. That’s the longest streak since at least 1920.

Options traders are also betting on prices rallying. The biggest position is in call options expiring in November 2010, giving traders the right to buy the metal at $1,500 by then. The next biggest position is the call option for $2,000 expiring in November 2011, data from the Comex exchange in New York show.

“Investors’ interest is still growing and still hasn’t reached a reasonable part of their portfolio,” UniCredit’s Hitzfeld said. “Gold is still an under-owned asset, that’s perfectly clear.” (Emphasis Added)

Considering the economic environment that we are entering, the gold market is nowhere near the bubble phase. This market has not even inflation adjusted from 1980!

Putting Gold In Perspective

1. In 1980, gold hit a then-record $873 an ounce. In today’s dollars, that would be $2,287,
according to the U.S. Labor Department’s inflation calculator.

2. This from the Treasury Monthly Bulletin: Outlays for 2010 through July, $2.9 Trillion. Receipts for 2010 through July, $1.7 Trillion. Deficit for 2010 through July.. $1.2 Trillion

“The Community Organizer In Chief” has already racked up a $1.2 Trillion deficit through the month of July with 5 more months yet to come! At this rate the total 2010 deficit would be $2,052 Trillion! That is truly “change you can believe in”.

None of this money has filtered through the system yet, but when it does you can bet that inflation is going to go ballistic. You make the call, do you dare being a little early to the explosion or do you want to try to scramble aboard once the ignition is lit.

George Soros is definitely manipulating the market with his comments, but do you really want to bet against his track record? The fact that he is buying gold while he calls it a bubble market is a clear warning sign that things are going to get real interesting, and soon. George Soros & $1,500 gold is a reason in and of itself to be buying gold and gold stocks now.

Till next time, good luck and good trading!