What are we to make of the mixed messages George Soros is sending out?
On January 28, 2010 investor and financier Soros told the Daily Telegraph that gold is the ultimate bubble:
Billionaire financier George Soros is the latest to enter the gold bubble debate, warning that with interest rates low around the world, policymakers are risking generating new bubbles which could cause crashes in the future.
Speaking Thursday to The Daily Telegraph, on the fringe of the World Economic Forum, Soros said: “When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment”.
The ultimate asset bubble is gold,” he added.
If you were an investor following Soros and decided to sell your gold or refrain from purchasing it for your portfolio as a result of his comments, than today you might be a little bewildered, as Mr. Soros’ Soros Fund Management LLC more than doubled its stake in gold in the 4th quarter of 2009:
Billionaire George Sorosâ€™s Soros Fund Management LLC more than doubled its holding in the biggest gold exchange-traded fund in the fourth quarter after bullion advanced 8.9 percent to a record.
The $25 billion New York-based firm became the fourth- largest holder in the SPDR Gold Trust, adding 3.728 million shares valued at $421 million, according to a filing with the U.S. Securities and Exchange Commission yesterday. Its investment was worth about $663 million, the fundâ€™s largest single investment, as of Dec. 31.
The 4th quarter of 2009 saw gold rise to new historic highs in terms of dollars, and Soros was buying.
Perhaps Soros meant that gold will become the ultimate bubble at some point in the future and was not referring to it being a bubble at current price levels.
Soros is well known for having the inside scoop on not just precious metals, but currencies, and has been blamed for currency collapses several times in his investing career. In late 2008 / early 2009, with oil in the $40 range, Soros suggested that the price of oil must reach at least $70 a barrel for a variety of reasons, including the current cost of production as well as to help usher in a new alternative energy paradigm. Today, oil is around $75 per barrel.
Now Soros is buying gold – and lots of it.
What does it mean? We’ll leave our readers to decide, but like Soros, we believe gold is the next big bubble, and it’s still in the process of being blown.
As the global economy continues to deteriorate over the next several years and the people realize their governments are unable to mitigate the crisis, gold will likely become a key asset of last resort.