But during the first quarter of the year George Soros and hedge fund managers Erich Mindich (founder of Eton Park Capital Management) and Paul Touradji (Touradji Capital Management) dumped nearly $1.5bn of gold between them in the SPDR Gold Trust alone.
Soros got rid of $800m leaving him with around $7bn of gold on the trust at the end of Q1compared to $655m at the end of last year; Mindich halved his stake to $326m; Touradji sold around $25m of his trust shares.
Running counter to them all is hedge fund doyen John Paulson who retained his entire $4.4bn holding in SPDR to remain the single largest shareholder in the largest physically-backed gold ETF.
Their reasons for selling differ. For example, Reuters argues that Soros owned gold because of fears of deflation, the sale suggesting that is now less of a concern.
Inflation view
Since all this initial activity, gold prices peaked, for the time being at least, at $1,575 an ounce early in May but they have fallen by 5% fall since then – the most recent moves being blamed by many on Soros’ latest actions. He may have previously called gold "the ultimate asset bubble", but in this case it is actions rather than words that are moving markets.
While deflation is not a concern for Soros, inflation most definitely is a concern for many investors who will turn to gold for its inflation-proofing qualities – gold is one asset that can be held by proponents of most sides of the in-, de-, stag-flation argument.
The immediate outlook for gold then is to expect those with no or just a small allocation to gold to increase while those who are heavily overweight gold will follow Soros’ lead and sell out.
They, at least, will not be making the same mistake as our former Prime Minister, Gordon Brown, who famously began to sell off the UK’s gold stocks when the price was just $282 an ounce.
Prices will continue to fall while sentiment wavers, or at least while the profile of those selling is higher than those buying. With Warren Buffett’s bearish stance on the precious metal already well known to all and sundry, the headline-grabbing moves may have to wait – unless a sovereign wealth fund or a Central Bank decides to wade in.
The case of Soros, a gold bear who is selling out of gold holdings, is enough to give investors pause and consider the reasons behind his timing. A more significant warning sign will be if Paulson ever decides to join him on that side of the trade.
