I am something of a gold bug, believing that gold (and silver) represent the best way to preserve wealth in inflationary times as well as representing a fantastic opportunity for speculation.
So, I was delighted a couple of years ago when George Soros bought a whole load of the stuff. “Great minds etc…”
But then, the other week, came the news that he had sold it all. The silence amongst gold bugs has been deafening. About the only response I have seen was to the effect that although Soros was small in bullion, he was big in mining. But my back-of-an-envelope calculations tell me that this is gibberish – his mine holdings are nothing like the size of his former bullion holdings. The truth is that Soros has sold.
It is possible that what he has done is to get out of ETFs (a sort of fund) and into actual physical metal (a certain sort of gold bug will tell you there is a crucial difference). But I would have thought that would show up in exactly the sort of records that told us he had sold. (I am not an expert here so I would love to know).
It is also possible that he thinks there is going to be a confiscation like 1933. But wouldn’t he be bigger into mining stocks? And anyway, what are the chances of a confiscation with a divided Congress? Sure, the Republicans in the House seem to be reluctant to do anything sensible (like keeping the debt ceiling where it is) but equally they don’t seem too keen on doing anything stupid either. There might be a confiscation here, in Britain, but not in the US.
I suppose it could all be a bluff to depress the price. Maybe, but so far it doesn’t seem to have worked.
Or maybe Soros is simply stupid. But I don’t think Soros does stupid. I may not agree with his politics, but his reading of finance is normally spot on.
Perhaps he’s looking at the situation in Greece. Perhaps he thinks Greece is about to default. Greece defaulting is likely to be very like Lehman going bust – just bigger. When Lehman went bust just about all asset classes (including gold) fell as people got desperate for cash. If Greece goes the same way there are going to be some wonderful fire sales. Only later will governments carpet-bomb the planet with out-of-thin-air cash leading to a further boost to the gold price.
Maybe, maybe, but I really don’t know. Any ideas?