George Soros Banks on Gold

Soros Fund Management, the investment firm of George Soros, has revealed that it had purchased shares in the largest gold producer in the world, Barrick Gold Corp, even as the prices of gold have risen, increasing by more than 20% since the start of the year. Soros’ move was driven primarily by the increasing demand for gold resulting from the depreciation of the US dollar. There were also worries regarding how effective the monetary policies of the global central banks were.

Soros Fund Management has bought 19.4 million shares in the company. It represents 7.5% of the assets of Barrick Gold Corp, amounting to $263.7 million. With a range of cost cutting measures, Barrick Gold’s stock price has soared by up to 100% since the beginning of the year which helped the company deleverage itself.

Soros also purchased call options on 1.05 million shares in the SPDR Gold Trust (GLD) exchange-traded fund. However, John Paulson, the hedge fund manager, was not so optimistic on gold. He got rid of the 4.8 million shares he had in the SPDR Gold Trust. Billionaire investor Stan Druckenmiller, who was previously Soros’ chief strategist, shares Soros’ optimism on gold and has indicated that gold gets his largest currency allocation.

Soros’ investment firm has cut its American-listed equity holdings by over 33%. It stood at $3.5 billion in the previous quarter. Soros also has a put option amounting to around 2.1 million shares on the SPDR S&P 500, which is double that of 1 million shares at the end of the previous year.

Soros has a warning for investors, regarding the economic vulnerability of China and the increasing debt. The debt size of China resembles the debt faced by the US economy before the Great Recession in 2008. In fact, this worry is what analysts believe has led Soros to gold since it is considered as a safe haven that can withstand economic catastrophes.

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