George Soros switches from physical gold to gold stocks and that is very bullish for gold prices … Ever the investor who loves to confuse markets – remember how his description of gold as the 'ultimate bubble' confused some folk as he bought the metal himself – George Soros has done it again with his gold ETF sales. Today the global financial press is awash with reports that Mr. Soros has sold gold again. True. But he has reinvested that money in a far more risky investment in gold miners whose performance is leveraged against the gold price. They go up faster than the gold price and they fall further when it comes down too. – GoldSeek
Dominant Social Theme: Gold, the barbaric metal.
Free-Market Analysis: We learn in this short article that billionaire investor George Soros is betting on mining stocks. "Very bullish," for gold, the article tells us. Here's more:
The Soros Investment Fund's 13F filing does indeed show the sale of 12 per cent of his total investment in GLD. But it also reveals that he then used $40 million of that cash to buy shares of the Market Vectors Gold Miner Major ETF (GDX).
Then he also bought $25 million worth of call options on the Market Vectors Gold Miner Junior ETF (GDXJ). As all gold mining stocks are leveraged plays on the price of gold and the juniors are the most leveraged bet of all, this is very bullish. The second investment in the juniors is about as bullish on the gold price as anybody could get.
How typical of Mr. Soros to put the cat among the pigeons again. He likes of course to throw up a smokescreen in one direction while moving off in another. The true mark of the master trader …
This looks a clever move, so long as the stock market's current euphoria holds up, and gold bounces off $1,321 as a testing of the bottom of the last sell-off. Still Mr. Soros knows his market timing and following in his wake usually pays off handsomely. But better still to be ahead of him…
What the article is suggesting, it seems, is that investors follow up a big downward plunge in gold with renewed positions in metals mining stocks.
This may be a savvy contrarian action or it may be a case of throwing good money after bad. The mood on metals has soured and thus one is left with two options: Expect more of the same as gold pursues another leg down or fight the trend, presumably under an assumption that it has run its course.
Soros seems to have made up his mind. And in doing so has surprised us.
With Soros it's probably a case of watching what he does, not what he says – as the article points out, he loves to mislead the public by giving voice to one opinion while investing in an entirely different way.
Also, Soros is about as big an insider as there is. If anyone understands the near-term future of metals prices it might be him.
What exactly does he know?
Strange times, indeed.