It was just two years ago that George Soros, the man who broke the Bank of England, called gold the “ultimate asset bubble”. While Soros is known for some of the most profitable trades in history, he is only human, and gold set out to prove him wrong. Soros made his comments and dumped the majority of his gold holdings when the precious metal was hovering at $1,275/oz. After watching the commodity skyrocket to $1,900/oz and settle out at its $1,600 level, Soros appears to have rekindled his faith for gold [for more gold news and analysis subscribe to our free newsletter].
Soros not just doubled down his gold holdings, but nearly tripled his investment in the ultra popular SPDR Gold Trust (GLD). The last time Soros reported what was in his portfolio, he held 319,550 shares of the fund, or about $52 million worth at the time of the release. Now, it has been reported that his GLD stake has jumped to a total of 884,400 shares, worth roughly $137.3 million [see also Three Reasons Why Gold Is Overvalued].
But Soros wasn’t alone. Billionaire John Paulson increased his GLD stake by 26% to hold 21.8 million shares of the world’s second largest ETF. That means that Paulson has approximately 44% of his company’s assets in this singular fund; a big bet that could be a make or break investment depending on the future of gold.
Why The Sudden Spike?
The sudden spike in holdings is likely spawning from two things: the overall lackluster performance of gold as of late and the hopes of a third round of quantitative easing. Many see gold’s current price as an excellent entry point before the metal makes another charge higher. If indeed QE 3 rears its head, this precious metal will almost certainly see a spike in both volume and price, as investors will flock to the safe haven given the devaluation of the dollar [see also Were Gold and Silver Manipulated Alongside LIBOR?].
Still, there are plenty of others who think that it is still too early to pull the trigger on this ETF. Jim Rogers recently stated that he feels gold has another 20% to drop before it will start back up. From the time he made that comment, that would mean he felt gold could sink to as low as $1,140 before he was comfortable buying in. But the massive bets that both Paulson and Soros have placed are probably enough for most investors to overcome Rogers’ skepticism. It takes a real investor to admit when he/she has made a mistake, and Soros’ recent purchase of GLD has done just that. While he thought the metal to be a massive bubble, he has apparently changed his mind, and feels that it has nowhere to go but up.
Disclosure: No positions at time of writing.