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Guest Post: Why George Soros' And John Paulson's #1 Position Is Gold And Gold Stocks

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Thu, 04/29/2010 - 13:54 | 324068 HEHEHE
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There's legitimacy to the gold story but any serious drop in the stock markets will result in a major gold correction as sepculators will need to delevarge and do so by selling things people will buy aka gold etc.  I'll sit there at that point waiting to buy, probably back in the 900's.

Why do they point to John Paulson?  He rig the gold market too?

Thu, 04/29/2010 - 14:16 | 324122 Mr Lennon Hendrix
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My friend said the same to me the other week.  I asked why he thought that.  He said everybody was saying it.  I said gold's 1st support was at X, and 2nd support was at Y, and that if the market was tested, it would not break Y. 

Hehehehehe, I mean no disrespect, as you are allowed your opinion.  Mine?  Oh yes, ok. 

There is no spoon.  Up is down, left is right, numbers are jokes, and what is REAL will BE. 

Thu, 04/29/2010 - 22:03 | 324816 jdrose1985
jdrose1985's picture

If gold goes up, I'll buy a little. If gold goes down, I'll buy a lot.

How's that sound?

Gold is not a bubble.

Thu, 04/29/2010 - 14:29 | 324154 Hansel
Hansel's picture

The players with the largest leverage in gold are on the short side, i.e. the big banks, gov't, etfs without backing physical.  The people buying physical have no leverage.

Thu, 04/29/2010 - 14:33 | 324162 Gunther
Gunther's picture

... and thus are not subject to margin calls.

Thu, 04/29/2010 - 15:02 | 324232 Hephasteus
Hephasteus's picture

They only had real gold on the first crash now they got HFT and paper gold. Same thing as the 2nd crash in 1933. Read your history.

Fri, 04/30/2010 - 02:20 | 324983 Johnny Bravo
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The funny thing about the article presented is its complete lack of fact.

Soros has close to 500 million in gold (although slightly less than that) out of a 25 billion dollar portfolio.

That is not a majority of his portfolio by any stretch of the imagination.  In fact, it is less than 2%.

Thu, 04/29/2010 - 14:46 | 324195 jimmyjames
jimmyjames's picture
by HEHEHE
on Thu, 04/29/2010 - 11:54
#324068

 

There's legitimacy to the gold story but any serious drop in the stock markets will result in a major gold correction as sepculators will need to delevarge and do so by selling things people will buy aka gold etc.  I'll sit there at that point waiting to buy, probably back in the 900's.

*********************************

That's quite possible and its happened-lots of times in the last 10 years--

People that bought for the wrong reason-will sell for the wrong reason--

I think it "could" tag the 65 WMA-in a sell off-if-1000 fails-

Of course-it may not happen-but-one should be hedged for it imo--

"If"- it does happen-miners will diverge at some point and when they do-load up-

Thu, 04/29/2010 - 15:48 | 324318 43 Steelie
43 Steelie's picture

Read Michael Krieger's article and maybe you will rethink that first paragraph:

"The real reason for the dollar rally was that the world expected deflation and with the world’s reserve currency still the U.S. dollar this meant it would be time to settle positions much of which meant dollar settlement."

Now while I agree with you on the deleveraging point and think that is a possibility, I do think that after seeing how the fed and other CBs have reacted that the world is now accepting inflation, not deflation as an inevitability. This point could not have been more clear 2 days ago during the massive sell off and subsequent gold and dollar rally.

I was on a call with Sprott today and he made a great point: "You don't realize a bank run has really occurred until it's already over." You better believe citizens of Greece, Portugal and Spain and getting what they can at this point and converting it to something hard. And I doubt they will be exchanging that for FRNs.

 

To sum up...accumulate slowly month by month but leave enough dry powder just in case that real deleveraging technical correction occurs. Then push them all in. 

Thu, 04/29/2010 - 16:42 | 324383 akak
akak's picture

"... any serious drop in the stock markets will result in a major gold correction as sepculators will need to delevarge and do so by selling things people will buy aka gold etc.  I'll sit there at that point waiting to buy, probably back in the 900's."

My gut tells me that anyone expecting such an outcome, just because it happened once (and under very suspicious circumstances), may end up being the proverbial general preparing to fight the last war.  My bet is that such a scenario does NOT happen again, especially in light of the growing realization and market acknowledgement that gold is NOT merely an "inverse play" on the US dollar, if it truly ever was.

Thu, 04/29/2010 - 17:01 | 324402 43 Steelie
43 Steelie's picture

I agree. It seems almost too easy and too obvious to expect a major leg down. There are so many people hoping for it. This is exactly why gold is not a bubble. It can't be a bubble if holders of it are praying for the price to go down. I don't think people were saying the same thing about Pets.com in 1999 or houses in 2006.

Only thing that could possibly trigger such a correction would be an absurd amount of selling by the failing countries (PIIGS) or banks, but that would only be technical. And if it reaches a point where Greece starts being asked to sell whatever reserves it has, at that point the Greek government might as well say, "fuck it."

To wait for that moment would take you being glued to your screen for that couple day window because it's hard to imagine a scenario where it last for much longer than that.

Thu, 04/29/2010 - 22:17 | 324815 jdrose1985
jdrose1985's picture

Steelie Jimmy Rogers has recently said for the record that he is accumulating USD short term for "technical reasons"

Maybe he knows something.

 

Fri, 04/30/2010 - 02:23 | 324984 Johnny Bravo
Johnny Bravo's picture

"Holders of gold are praying for the price to go down"

Really?  Seems to me everybody holding gold believes it will go up, which is why they are holding it.

Also, your analogies of pets.com and housing are exactly why gold is in a bubble.  People flock to assets, regardless of price.

Technically, gold is ready to pull back from a long term perspective.  Any chart will back this assertion.

Thu, 04/29/2010 - 17:04 | 324431 jimmyjames
jimmyjames's picture

My gut tells me that anyone expecting such an outcome, just because it happened once (and under very suspicious circumstances), may end up being the proverbial general preparing to fight the last war.

*********************************

Once?

Gold has sold off in market swoons a hell of a lot more then once-

As far as an inverse play on the dollar-it has been more that-then a competing currency-during its bull market--

2005 was the only real meaningful competition play-in the last 10 years-it has coupled up again-somewhat-the last while-but still too soon to see if a trend devalops--

If it does-then gold will fly-in a safehaven play-but if funds start bailing-when shit scared investors scream sell-then miners "could" pull gold lower--

If it doesn't sell off-great-if it does-even better--

 

Thu, 04/29/2010 - 17:22 | 324466 boiow
boiow's picture

face facts people. gold will not see sub $1000 again.

Thu, 04/29/2010 - 23:06 | 324871 False_Profit
False_Profit's picture

...india loaded up on au at $1040ish, i think they were/are pretty confident that it won't be too much lower than that any time soon.

the frn$ bubble will burst just like all other fiat currencies that have gone before...

Fri, 04/30/2010 - 16:03 | 326023 Hephasteus
Hephasteus's picture

No they didn't. They leased the gold. It was just a sham transaction to make believe 1100 gold at the time was too high. India didn't get any delivery and none of it ended up in their markets selling for weddings and jewelry.

Fri, 04/30/2010 - 02:25 | 324985 Johnny Bravo
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I'm sure that people said the same thing in the early 80s when it was 850 an ounce.  Then the economy improved and it was down to 250.

Fri, 04/30/2010 - 06:00 | 325056 Rick64
Rick64's picture

I'm sure that people said the same thing in the early 80s when it was 850 an ounce.  Then the economy improved and it was down to 250.

 In the 80s the low was 284. In 99 and 01 it reached 252 & 256.

Thu, 04/29/2010 - 13:57 | 324080 Mr Lennon Hendrix
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Awesome thanks.

Thu, 04/29/2010 - 13:59 | 324084 Segestan
Segestan's picture

The gold bugs, and 3 billion Asian peasants have 6,000 years of human history that says they are right.

 In our world of modern industry and consumerism credit is of course vital to a working system, but to remove gold is to remove the only tool that has worked for civilized nations.

Thu, 04/29/2010 - 21:42 | 324803 Augustus
Augustus's picture

3,000,000,000 pesants for 6,000 years makes their practices the ones you want to rely upon?  You don't run any real money do you?

Thu, 04/29/2010 - 14:01 | 324092 Double down
Double down's picture

Pretty darn good stuff.

Thu, 04/29/2010 - 14:07 | 324107 SgtShaftoe
SgtShaftoe's picture

yup, pretty much... I wish I had more money to put in gold mining stocks.

Thu, 04/29/2010 - 23:12 | 324878 False_Profit
False_Profit's picture

...gold mining stocks are fine-until dear leader decides that you have made too much money on the upside and that it is in the best interest of the country that you forfeit 90% of your capital gain as a "windfall profit".  we are not playing by the old rules anymore people, the paradigm has changed.  past performance does not predict future results in terms of our representative republic.

you know, there is a limit to what a person really needs to live on in a year...if a nail sticks up too far, it gets hammered.

Thu, 04/29/2010 - 14:08 | 324111 junkyard dog
junkyard dog's picture

A good power point presentation, but nothing new  for those who have been here for more than three months.

 

Thu, 04/29/2010 - 14:32 | 324115 Gunther
Gunther's picture

The bull market started 2008??

Why so late; don't they have a stockcharts.com-subsription to show longer-term-charts?

Valuing gold only US-centric is utterly stupid; the price is set world-wide. Imagine a Chinese billionaire, Japanese housewives or an Oil Sheikh buying bullion big time.

The conclusion might be correct but the aguments supporting it?

I would not invest my money with those guys.

 

Fri, 04/30/2010 - 02:26 | 324987 Johnny Bravo
Johnny Bravo's picture

Not to mention that the assertion that Soros has "the majority of his money" in gold is completely false.  It is less than 2%, which can be verified independently with a google search.

Thu, 04/29/2010 - 14:11 | 324116 LeBalance
LeBalance's picture

In the outline bulleted format the statement:

"Precious metal stocks are the most volatile asset class in the world because there is a community that thinks gold is functionally useless and a relic (governments and bankers) and a community that thinks only gold is money and money is gold (the gold bugs and 3 billion Asian peasants). Both are right."

is made as if it will appear in the document.  I don't find it.

In addition, this statement is false.  Government and banksters know very well what gold is.  Its the thing that makes them play honestly.  They do not view it as a relic, they view it with the same respect as goldbugs do.  That's why all of their real holdings are in gold and items of value.

Thu, 04/29/2010 - 14:17 | 324125 Nonconformist
Nonconformist's picture

Sophomoric promotional piece.

Fri, 04/30/2010 - 02:27 | 324988 Johnny Bravo
Johnny Bravo's picture

+1172.  (an ounce)  LOL

Thu, 04/29/2010 - 14:36 | 324174 unwashedmass
unwashedmass's picture

 

You forgot the most important thing to know about the gold & silver markets --

manipulation is not only allowed, but government subsidized and shielded from nosey peasants.

In fact, this is one market that has its own government guardian masquerading as a "regulator", the CTFC

Thu, 04/29/2010 - 14:47 | 324200 godfader
godfader's picture

Hilarious. Atyant Capital do not seem to understand that the gold positions in Paulson & Soros funds are (to a large extent) representing GOLD SHARE CLASSES that have their NAV denominated in Gold ounces rather than in EUR or USD.

I.e. it is factually not the fund manager holding an outright gold position but the shareclass holder (=investor) moving funds into a share class receiving their payout in gold ounces rather than in fiat currency. If Paulson "adds" to his Gold position then it means more of his investors move assets into the Gold share class or the underlying assets (Paulson's actual equity, corporate bond etc. holdings) appreciate and therefore command a larger Gold hedge.

It has little to do with Paulson becoming more bullish or more bearish on Gold per se.

Fri, 04/30/2010 - 06:09 | 325064 Rick64
Rick64's picture

Paulson and Soros are invested in NG a mining co.. (100M & 75M)

Thu, 04/29/2010 - 14:47 | 324202 nope-1004
nope-1004's picture

What I get from this piece is the authors basically prove that Gold was headed to the moon in late '09, but the central banks have since stepped in and manipulation is prevalent, reducing price.

 

I truly don't believe there is any aspect of todays ponzi economy that isn't manipulated.

Thu, 04/29/2010 - 16:02 | 324343 SteveNYC
SteveNYC's picture

....and Geithner needs to go to jail.

Thu, 04/29/2010 - 23:16 | 324880 False_Profit
False_Profit's picture

...hey, if they're going to manipulate a 30% annual capital appreciation-count me in!  i'll be the knat on the elephant's ass...

...isn't that better than berkshire?

Thu, 04/29/2010 - 14:54 | 324211 greased up deaf guy
greased up deaf guy's picture

the two links to the pdf aren't working for me. anyone else having issues?

Thu, 04/29/2010 - 15:04 | 324235 Pladizow
Pladizow's picture

Looking for a bang? - GDXJ

Thu, 04/29/2010 - 15:10 | 324250 rubearish10
rubearish10's picture

So if were going to own a Gold, Silver or Gold & Silver "tracking" instrument over GLD/SLV would/should CEF or SGOL work better? This excluding the physical, 'cause we all should be owning physical, I get that.

Thu, 04/29/2010 - 15:38 | 324303 43 Steelie
43 Steelie's picture

Just Sprott's Gold Bullion Fund - Ticker: PHYS. Nothing else.

I used to like CEF a lot but TD's article he posted a few backs freaked me out so I backed away a bit. 

Thu, 04/29/2010 - 15:54 | 324333 pooplagrande
pooplagrande's picture

I am getting tempted to buy gold people...that is not a good sign...must be near a top!

Thu, 04/29/2010 - 16:56 | 324412 Lighty
Lighty's picture

Yes, like many of you said, I fear another possible downturn in gold, before the total explosion.

Looking at past bubble charts there shouldn't be anything of that, and so now we would be at the beginning of the 3rd,parabolic stage.

Better to invest little by little,for now.

Thu, 04/29/2010 - 17:20 | 324458 cocoablini
cocoablini's picture

The barbarous relic comment comes from those institutions that want to control MONEY SUPPLY. Banks, the FED, the Congress etc(Euro counterparts) hate,hate,hate and fracking hate gold because when the shit hits the fan THEY CANNOT MAKE it to solve their problems.
Let's look at Greece, where the IMF and various countries create 150 billion EUROS(I say create-they did not have the cash or money supply to LOAN it) in credit and hand it over to the event horizon we call Greece.
Think they could pull that off with any standard(gold, silver or beach glass?)
It doesn't matter if it's gold, or a bi-metal standard. The system has a problem with any standard because it's the fixed target. Even when you fractionalize and derivitize the standard 30x it's still pinned to some faint thing.
The banks have fractionalized loaned times on a source deposit of cash deposits(which in itself has no source deposit.)
The ponzi is so far removed from the source money that any standard would cause a massive implosion and deflationary black hold.
So of course they hate gold. And some folks like Soros and Paulson have a gazillion bucks they have to secure in some stable form(not dollars, euros.)
It's all going to shit so fast.
Gold miners will be in full sing trying to extract gold in 2gram per tonne averages to make this investment gold. Any penny, 2 buck chuck miner will be worth 10x if they have a deposit at all. The big boys, who have been spending years dicking around and hedging and shorting their own product no have to dehedge and eat every single junior out there to make a consistent amount of real, not paper futures, gold. See Barrick.
If you look at the 30's and 40's, gold miners(Homestake) went on a long and fast rise because they were the only ones making real money. In a deflation, gold=liquid and fungible currency as all these bank toys and contraptions implode and become useless.

Thu, 04/29/2010 - 17:24 | 324471 cocoablini
cocoablini's picture

I suggest while the hot money is pouring out of GDX stocks and into producing Miners(GDXJ, New Goldm San Gold etc.) you start looking at explorers and near producers NOW. Spread the money out and if 50% pan out, you are like pulling 10x. Jay Taylor or the Al Korelin Report interview prospector mining companies. It s pretty interesting. Jay Taylor has a Podcast on iTunes as does Big Al.

 

Thu, 04/29/2010 - 23:24 | 324884 False_Profit
False_Profit's picture

i agree with your previous comment, however, regarding comment #324471 i am again going on record again and say-the paradigm has changed.  the stock market is on track to be nationalized.  excessive profits will not be realized by the mortals that are participating.  "windfall" profits will be taxed back to their rightful owner-the politburo in washington to be redistributed to those more deserving that are not as fortunate as you.

the game has changed and most are still playing by the own rules and will be rudely awakened at some point to a new reality...the new reality.

Thu, 04/29/2010 - 18:29 | 324581 Frank Owen
Frank Owen's picture

the pdf link is broken:   Page not found
The requested page could not be found.

Thu, 04/29/2010 - 18:49 | 324609 omi
omi's picture

>>Regular Technical Analysis will not work in the gold stocks market.

 

WHAAAAAAAAAAAAAAAAAAAAT????

 

Gold is THE MOST TECHNICAL market, nothing follows TA better than gold.

Thu, 04/29/2010 - 20:10 | 324697 Jiiins
Jiiins's picture

Not sure about this... intervention is so much present that charts don't represent greed and fear anymore. But if you can actually forecast the out-of-the-blue $10-$20 flash drops and make money on them I salute you (and I have some trading money to give you).

Thu, 04/29/2010 - 20:11 | 324695 Jiiins
Jiiins's picture

.

Thu, 04/29/2010 - 20:24 | 324719 onlooker
onlooker's picture

10 or 12 years ago one could buy gold at $300 to $400 and clad half dollars at 10% over face value (55cents for a half dollar). All have gone up and down since then. For the "fools" who bought in that period, things look OK now and if gold goes to $600 it still looks good.

Thu, 04/29/2010 - 21:42 | 324805 glenlloyd
glenlloyd's picture

I'll admit, any time I find the use of the word "pudding" I get interested!

Thu, 04/29/2010 - 21:58 | 324813 FranSix
FranSix's picture

When you're talking gold mining, the ore in the ground needs to be processed, refined and sold before it can be confiscated.  And the most important consideration in gold mining is geology.  Geology can't be changed to suit the purpose.  Probably the best strategy is compare, compare, compare.  

Its easy to buy in, but to know when to sell is always very difficult.  The Canadian stock market is the wild west of finance, be forewarned the entire junior market is rife with derivatives and naked short sellers.  Its fully legal.  Although, I  must say that anybody naked short selling a gold stock right now is engaged in gambling, while the longs are well positioned.

If you ask me, I think this was a brilliant observation at the time, where gold miners are set to rally against the gold price as they had in 2002.  An excellent theory!

http://blogs.stockcharts.com/chartwatchers/2010/02/gold-miners-vs-gold-f...

Another way of day trading junior gold mining companies is the GDXJ.

Mirror File Of Edison Report(pdf):

files.me.com/fransix/rz2686

Mirror File Of Institutional Advisors Chartworks(pdf):

files.me.com/fransix/k95iib

Thu, 04/29/2010 - 23:37 | 324901 fasTTcar
fasTTcar's picture

Miners are subject to strikes, earthquakes, government nationalization.

More importantly, they are very susceptable to the variable costs involved in mining - labor and energy.  In an inflationary environment, which is a big reason that you would bet on gold in the first place, the multiple leverage gained by mining stocks gets eaten into pretty heavily by the cost escalations.  See 2008 Fort McMurray Alberta for a recent example.

It seems to me if would be easier to own the actual output of these mines.  No paper promises, no risk of the CFO screwing a staffer and taking off to Costa Rica.  No counterparty risk whatsoever. 

Accepted worldwide, in any currency, at the same rate of buying power.  Seems almost quaint.

If you don't hold it, you don't own it.

 

 

Fri, 04/30/2010 - 06:55 | 325093 FranSix
FranSix's picture

Mining is a risky venture for sure, that's why you invest in management.

The word is deflation.  Or at least liquidity trap, where adding to the money supply does not equate with any real growth in main street economy.  I don't see any "inflation."

There is only one place in the world where nationalization of gold miners is a real risk.  Gold is performing against all currencies, even the Yen.  

Like I said, geology is a priority.  If the grade isn't there, then you can't change it. Grade dilution is the biggest contributor to cost.

What if they devalued currency against gold because of the depression?  Gold miners are positioned to benefit, while perhaps base metals miners aren't.

Fri, 04/30/2010 - 01:32 | 324972 Jeanbon
Jeanbon's picture

When Gold goes up, they call it bull market.

When Gold goes down, they call it intermediate correction.

I am asking myself who is bearish on Gold today, and can

the crowd be right?

 

This a pump and dump story for Soros and Paulson

Fri, 04/30/2010 - 02:31 | 324989 Johnny Bravo
Johnny Bravo's picture

Nobody can be bearish on gold, especially at zerohedge, because gold only goes up, except when it is manipulated.

If it goes up 500% in a decade, it is manipulated downward because it was down 10 bucks one day.

This bullish sentiment is exactly why it will fall.

Fri, 04/30/2010 - 06:18 | 325067 Rick64
Rick64's picture

I guess those whistleblowers of gold manipulation were lying. Rather than being manipulated downward, I look at it as being suppressed.

Fri, 04/30/2010 - 07:03 | 325099 FranSix
Fri, 04/30/2010 - 06:12 | 325065 Rick64
Rick64's picture

Actually Soros called it a bubble while investing more in GLD and NG.

Fri, 04/30/2010 - 04:14 | 325030 Grand Supercycle
Grand Supercycle's picture

 

Previously mentioned EURO buying support has returned...

 

MARKET UPDATES:
http://www.zerohedge.com/forum/latest-market-outlook-0

Fri, 04/30/2010 - 13:18 | 325745 susiesss
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would you please send it to susiesss910@gmail.com, I can not see it .thanks very much!

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