The Soros Gold Selloff: Doom or Day-Trading?

The news is full of stories today about George Soros selling off 55% of his holdings in the Spydr Gold ETF (GLD) at the end of last year, treating it as a death-knell for gold.  That conclusion is pretty myopic. I’ll explain why:

In the second quarter of 2012, Soros more than doubled his holdings in GLD, buying almost 565,000 shares to bring his total to 884,400.

In the third quarter, he bought another 415,000 shares to bring his total to 1.3 million (compared to the aprroximately 320,000 shares he held in the first quarter.)

So, he bought nearly 1 million shares of GLD in 6 months. His selling 700,000 shares in the 4th quarter of 2012 still leaves him with almost twice as many shares as he had at this time last year.

With all the recent high profile mergers and acquisitions, and Warren Buffet saying he wasn’t finished buying large companies, Soros may simply be dropping a short-term position that he was in for a quick buck, and is planning some acquisitions of his own. The reason people invest in ETFs (as Soros did) rather than hold the physical metal is because they have no intention of holding gold for the long haul.

The price of gold has been dropping as short-term economic prospects improve, but as soon as the bond market isn’t manipulated by the Fed and Bank of Japan, interest rates will jump, fueled by all the extra trillions of dollars printed by the central banks.  The recent speculation regarding competitive currency devaluations (currency wars) shows that some people are already looking beyond the next quarter.

by David Peterson

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