WSJ Reports Soros, Burbank Selling Gold, Silver, While Paulson Sees Gold Hitting $4,000 In Three Years

Tyler Durden's picture

The rumormill around who is buying and selling precious metals is getting more ridiculous than daily Radioshack LBO speculation. The latest comes from the WSJ which informs that based on "people close to the matter" Soros and Burbank are now dumping their gold and silver: "George Soros's big hedge fund, a firm operated by high-profile investor John Burbank and some other leading firms have been selling gold and silver, according to people close to the matter, after furiously accumulating precious metals for much of the past two years." Greg Zuckerman's conclusion, assuming a multi billion hedge fund will actually let its competitors know what it is doing concurrently as it is doing it, is merited: "Their selling suggested the sharp, nine-month run-up for precious metals could be entering more dangerous territory." Of course, something tells us that just like Goldman, whose prop desk has a nagging tendency to buy as its sellside "analysts" say sell, we would rather hold off until we see respective 13Fs on the matter. In the meantime, we fail to see where over the past week the central (pardon the pun) thesis has changed: namely that central banks will not print more linen/cotton when the time comes. And if the market is indeed starting to price in QEasing's end, then the deflationary scare will certainly see the RUT plunge and undo months of carefully executed (by NYU interns) POMO operations. For a Fed which equates the economy with the RUT, this is simply unacceptable.

More from the WSJ:

Yet silver, which has had a huge run, remains up nearly 38% in 2011. It rose 84% last year.

And some prominent investment pros continue to favor precious metals, among them hedge-fund manager John Paulson.

Last week an exchange-traded fund, or ETF, that owns silver bullion—the iShares Silver Trust—was the most active ETF on the U.S. market on some days, a sign of the rabid recent interest in silver.

"We haven't seen this much volatility in decades," said Robin Rodriguez, a metals trader in Charlottesville, Va. "We have such large profits built in," so some investors are taking their winnings, said Mr. Rodriguez, who remains bullish on the metal.

Interest in holding the silver ETF grew so intense it became hard to borrow shares to sell, as bearish traders need to do if they want to sell the metal short and bet on a decline.

All this helped set up the tumble, which started late Sunday, catching many by surprise. As sell orders flooded the market in Asia, brokers sought more collateral from investors who had bought on margin, even as they fielded calls from anxious investors who wanted to sell.

"Everybody wanted to get out," said Richard Digenan, an executive at R.J. O'Brien, a brokerage firm in Chicago.

The other side of the story, that of repeated margin hikes, is well known to ZH readers:

For those who invest in silver via the futures market rather than an ETF, exchanges and brokers have been raising margin requirements, the amount of collateral investors must leave with their broker to back a position.

CME Group, a commodity-exchange operator, has raised margin requirements three times in a week. It announced the latest increase Tuesday.

Many investors in silver futures make heavy use of borrowed money and were faced with either sending more collateral to their brokers or selling some contracts.

But back to the original story:

For nearly two years, Mr. Soros's hedge-fund firm bought gold and silver, becoming the seventh-largest holder of the biggest gold ETF, the SPDR Gold Shares. Some others with stellar records—including Mr. Burbank, of Passport Capital, and Alan Fournier, of Pennant Capital—also have been passionate about precious metals, giving encouragement to individual investors to follow.

Now they are selling, in each case for distinct reasons.

While many who buy gold do so to protect against future inflation, Soros Fund Management bought gold to protect against the possibility of the opposite—debilitating deflation, or a sustained drop in consumer prices.

But now the $28 billion Soros firm, which is run by Keith Anderson, believes chances of deflation are reduced, eliminating the need to hold as much gold, according to people close to the matter.

People familiar with Mr. Anderson's thinking said he believes the Federal Reserve's continuing to pump money into the system has reduced the likelihood of deflation.

The Soros team, meanwhile, isn't especially worried about a surge in inflation. Mr. Anderson has argued that by the end of this year the Fed will signal that interest-rate increases are in the offing, possibly early in 2012, according to someone close to the firm. Higher interest rates would tend to suppress inflation.

The Soros fund has sold much of its gold and silver investments over the past month or so, according to this person.

Mr. Burbank, a longtime gold supporter who predicts growing worries about the creditworthiness of the U.S. and some other nations, has trimmed some of his investments to lock in profits, according to someone close to the firm. This person added that Mr. Burbank remains a long-term gold bull and expects to buy more gold-mining shares after a decline.

Yes, this is the same Soros who bastardized Hayek a week ago, even as he admitted that the current monetary system is on the precipice.

As for the only guy who matters, and whose every move is studied under a microscope, he is not budging. In fact, he see gold at $4,000 in 3 years.

A number of high-profile investors remain huge holders of gold and silver, amid continuing concern about inflation and the dollar. Mr. Paulson, known for his lucrative bet against mortgages a few years ago, told investors he still has most of his personal money in gold-denominated funds operated by Paulson & Co.

Mr. Paulson told investors Tuesday morning that gold prices could go as high as $4,000 an ounce over the next three to five years, as the U.S. and U.K. flood the money supply. Gold settled in New York at $1,540.10 a troy ounce Tuesday.

Also, Wexford, run by Robert Rubin's right hand man from the Goldman arb desk days, and Mike Steinhardt protege, Chuck Davidson, doesn't appear to be going anywhere in a hurry either.

Wexford Capital, a $6.5 billion fund that has been a large buyer of silver over the past year, retains much of its metal positions, according to someone close to the matter.

Either way, a two day 20% correction, and everyone crawls out of the woodwork screaming bloody murder, even as silver has retraced to a price... from two weeks ago.

And once again we ask: will the Chairsatan stop printing? And what happens when the economy tumbles in Q2, as it will once the full hit from the Japanese economic collapse is felt, and Bernanke has no choice but to do in 2011 what he did in 2010? So yes, let silver drop to $30. Let it plunge to $20. The lower the better. Day traders on margin are advised to stay out. Everyone else, who has a personal vendetta with Bernanke however will find each incremental drop an even better opportunity to slam the stake in the heart of a failed monetary regime which is now in its last days.

Everything else is minute charts and irrelevant candles.

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What does it all mean's picture

I thought everyone bought Silver...

flacon's picture

I thought George Soros just finished his Bretton Woods (III) meeting with the notion that GOLD would play an important part in the New World Order (II) global currency. 

dlmaniac's picture

Whatever amount Soros wanna sell will fall right into the wide open dragon mouth known as "Beijing Put" rumored to be 3 Trillion Dollars deep.

 

Seriously it smells like the similar FT disinformation in January about mining companies hedging their products during that correction to throw weak hands off.

Michael's picture

OT

I just can believe how stupid our government thinks we are.

You can buy a 1080P video camcorder for under $1000.

The government has the best recording equipment money can buy.

Nothing will satisfy me on OBL's death except a 1080P video of the dead body of Osama Bin Laden.

Sony Handycam HDR-CX560V Camcorder - 1080p - 6.65 MP

http://www.google.com/products/catalog?hl=en&q=sony+camcorder+1080p&bav=on.2,or.r_gc.r_pw.&biw=1570&bih=671&wrapid=tlif130449598659110&um=1&ie=UTF-8&cid=15326852350998949199&sa=X&ei=fwfBTcSSJuSQ0QHK-cC3Cg&ved=0CFwQ8wIwBA#

 

BigJim's picture

Yup, that is OT.

They can't release the video yet.. they're still scrubbing the bits that show OBL welcoming them in and offering them tea, and saying "But Obama told me you'd be dropping my meds off tomorrow"

Old. No. 7's picture

Not really off topic. It's all one giant bullshit factory. They need a bullshit ETF.

sun tzu's picture

This whole scam is like a bad comedy. Now the story is that they killed him, flew his body to Afghanistan by chopper, then flew his body by chopper to the aircraft carrier. Somehow they were able to get a DNA sample to Washington DC within the same day from half way around the world and have it tested and confirmed. A flight from Afghanistan is 15 hours.

Then of course they had to follow Muslim tradition by giving him a burial within 24 hours, so they dumped his body in the ocean. Now all the Muslim scholars are saying it is against Muslim tradition to dump a body in the ocean unless the person died at sea. So they change their story to say that they didn't want to give him a proper burial because the site might become a shrine for terrorists. So they have to give him a proper Muslim burial to avoid offending Muslims, but they offended Muslims by dumping him in the ocean?They could have easily put him in an unmarked grave in the Afghan desert. 

To top it off, we are told that 4 choppers full of SEALs landed near the compound. A police station is down the street. An Pakistani military academy is nearby. No one responds to the vicous firefight happening nearby. Then we're told that the Pakistanis were not informed of the raid. The US government is now demanding that Pakistan explain why OBL was allowed to go undetected for 6 year in the compound. 

This ignores all the other inconsistencies in the OBL myth. He was supposedly deathly ill will kidney failure back in 1998. There were newspaper stories from the late 90's and soon after 9-11 about how he needed regular hospital visits for dialysis. 

LudwigVon's picture

disinformation ... Seriously it smells ... throw weak hands off.

Yes.

something tells us ... tendency to buy as its sellside say sell ... we would rather hold off 

Yes.

JPDG's picture

Is Soros selling physical?  

Hell, I'll buy as much as I can at these prices!  I'll even give him $1.50 over spot!

Spitzer's picture

He never purchased any physical. He is selling paper silver. This is bullish for real silver because he is probably dumping paper, which drives the price of phsical down so that he can get physical at lower prices.

One of these days, the SLV will be crashing while premiums on physical go insane.

RichyRoo's picture

Is it possible that insiders know COMEX is about to default, and so are getting rid of soon to be worthless paper silver? Is anyone aware of anyone selling large amounts of actual metal?

tmosley's picture

Good hypothesis.

This is what I am thinking now as well.  The paper pushers are changing the rules as fast as their little pens can cross paper, so everyone is abandoning the paper ship and pouring into physical.

As such, spot price is unlikely to recover.  Rather, the recovery will come in the form of constantly increasing premiums on real, physical silver, or the metal will simply disappear.

strannick's picture

Whats the most unreliable?

A) Soros

B) WSJ

C) US$

D) Gold/Silver

cossack55's picture

May we choose more than one?

Harlequin001's picture

Has anything changed that might cause gold and silver to sell off?

I think not...

falak pema's picture

we are in mini-deflation fed roller coaster as QE end is now being priced into assets/commodity future price trends. The MENA uncertainty factor also now heading down as OBL's demise and q-daffy problem are now pointing to stabilising summer heat there...apart from Syria and Iran...So the roller will move...

mogul rider's picture

richyroo my friend you win the crackerjack prize for the best comment this week. The weiners yap about silver up etc.

But why is it going up or going down?

It can't go up to the big numbers till the big boys say so. This rise was chump change. To the little guy it's mesmerizing, to the big boys it's a rounding error.

The parabolic caught them offguard so now they are simply re-adjusting and flipping over. After draining AAPL and NTFLX for eveyr last nickel they will scare you out of your positons. 

How?

Very close to your idea with an added twist or two.

You folks really didn't think you'd get all the cash did you. Think like  banker my dad used to say. Now you know why

Well done.

PS

Note that the hedgies were wiped out in 2008 selling into the fall to get liquidity for the margin calls. We are almost there again. The margin calls will be in play again.

Just watch over the next few months as the banksters bring hte house down again.

IMHO of course

Citxmech's picture

Already happening - Maples at my normal dealer are still $49ea. for some reason - hmmmm....

Time to visit the local shops and btfd.

GetZeeGold's picture

 

Gold is the ultimate bubble said spooky dude.....right before he bought it.

 

If George is selling....I'm buying.

 

We're not in the first grade anymore George. Your Jedi mind tricks won't even fool a Cub Scout.

 

 

 

 

TruthInSunshine's picture

Everyone assumes the U.S. is printing fiat like mad via the Federal Reserve borrowing 'lending' programs known as QE1 & QE2, and in at least one metric, they are correct: Bernanke buys treasury bonds in the secondary market from primary dealers, as Bernanke is forbidden from buying them directly from the Treasury by law.

This is essentially a loan of money to the U.S. Treasury from the Federal Reserve, which Congress delegated (essentially) its money printing/coinage function to.

However, not everyone equates this with 'money printing,' as much of what the Fed is buying is longer duration maturity treasuries, which are going to be more than a little difficult to sell with interest rates on most treasuries having risen since the bulk of this buying was done by Bernanke.

Regardless, I will leave that debate for another day (I have opined that ZIRP is far more responsible for soaring commodity prices and inflationary expectations in the future than QE ever was, and that ZIRP is the elephant in the room that no one seems to acknowledge).

But why did Paulson state (paraphrasing the Wall Street Criminal-Journal) that the UK is flooding their system with currency? That's basically and essentially the opposite of my understanding, and the reason why Paul Krugman, economist/Keynesian/Sock Puppet extraordinaire has been mocking the U.K.'s "austerity measures."

Something in this article is so out of place that is damns the credibility of the reporter, if not the WSJ (foregone conclusion when you have Federal Reserve moles and weasels like Hilsenrath on Fed Payola).

Math Man's picture

The Sept 130 puts on GLD are REALLY cheap.

 

20 implied vol.

 

Twindrives's picture

Soros, like Buffett and Munger, can shit and fall back into it.   Just die already you greedy old dinosaurs.   The world will do fine without your  hypocrisy and egos.  

DK Delta's picture

Soros is notorious for talking his book. I wouldn't trust any of these rumors either way.

Id fight Gandhi's picture

Never trust him. Trade the opposite,

Phillips Capital's picture

exactly. negative psychology (or whatever the term is.)

 

he already sold and sees no need to sell more at this low of a price. buying time. 

CitizenPete's picture

Something very very big is going down.

DoChenRollingBearing's picture

I feel the same way...

I sure am glad I am up to 12% of my assets in PMs, mostly gold.  And I am not selling.  I will quietly give it away to my kid (or grandkids in the future?).

Something wicked this way comes.

...

Res pubblica mortuus est.  Vivat imperium.

topcallingtroll's picture

It is an easy way to avoid probate and creditors.

DoChenRollingBearing's picture

top, thank God I have no creditors...

Credit is dangerous...

You should know that YOU are one of my favorite ZH friends here...

The Navigator's picture

"Credit is dangerous"

Agreed - unless one could time it to buy physical on credit, have hyper-inflation go to 2,000%, and then pay the banksters back with Zimbabwe dollars after some months use of their monopoly money. Thus real estate seems appealing at this time.

Problem is timing, which I never seem to get the timing right. But with silver, I got lucky - started in 2007 and still buying every other week.

With Soros, I don't believe a word he says - Jim Rogers, Marc Faber, I listen to.

Popo's picture

Credit is dangerous?   You don't sound much like an inflationist.

falak pema's picture

If credit is dangerous then the USA will name White house address as ...downing street!

And appoint Ben as head lawns-man!

rufusbird's picture

Soros tells you to listen to him. Jim and Marc asks you to listen to what they are saying.

Transformer's picture

I too, feel the cold wind of an approaching evil.  Something is about to happen.  Everything is on the verge.  Bonds, the dollar, MENA, Piigs, you name it.  In the past, when a big event is coming that will cause some markets to explode, prices seem to run down ahead of time, I guess to get the weak hands out.

Popo's picture

IMHO, the market is about to shit the bed.   Gold and silver too.    The powers that be can't afford to see bucky get hammered any lower and they need to scare some money back into it.

Watch for liquidity to vanish overnight, and then bucky will get wood.   It's an old game.

sun tzu's picture

Liquidity vanishes and everything crashes. Can TPTB afford that? The problem with releasing a tidal waves is that you can't control where the water goes

JW n FL's picture

No matter what the shake down is.. being physical and mobile, able to get the fuck outa dodge.. is FUCING PRICELESS!!

 

Who said you cant take it with you?

 

back to your point, sorry! having real tangibles.. gold / silver will always spend no matter what fast one they try to pull on "We the People" this time around! I am expecting a doosie! of a show!

 

http://www.youtube.com/watch?v=7nD7dbkkBIA

 

http://www.youtube.com/watch?v=qNZvfiKrJHo&feature=related

 

 http://www.youtube.com/watch?v=Ct9xzXUQLuY&feature=related

 

http://www.youtube.com/watch?v=hgcZUIc3oks&feature=related

JW n FL's picture

http://goo.gl/M4bcP FBI Don’t Need No Stinking Warrants! Personal / Civil Rights are a thing of the past!

 

"Unfortunately, the PATRIOT Act did Not! Include Checks to PROTECT! Americans” Senator R. Durbin (IL) http://goo.gl/MfmKX  

U.S. Army Pys Ops Verse U.S. Congressmen & Senators http://www.rollingstone.com/politics/news/another-runaway-general-army-deploys-psy-ops-on-u-s-senators-20110223

 

http://goo.gl/sqbEu Senator Al Franken asks Apple why the IPhone Tracks its Users EVERY MOVE! Even while the Phone is OFF!

 

Senate trying to hide Campaign Contribution Monies from Government (Military) Contractors with the Argument “Free Speech” LMFAO!! http://goo.gl/35V9l

 

Home Land Security & the F.B.I. are concentrating on PlayStation Hackers! http://goo.gl/MhLSI Wonder why? Lobby $'s!! http://goo.gl/aMM4a

 

 

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

  

http://goo.gl/OeC1A Miami Metro Dade Police Predator Drone on Patrol & coming to a City near YOU! NEXT!

 

http://goo.gl/itJiJ (YouTube Video) Why does the military train to rescue bankers?

falak pema's picture

JW everything you say is valid provided : you can hold on to physical for 4-5 years all through the paradigm change shit storm coming with USD demise as SOLE reserve currency. This will be awesome as the US Oligarchy will fight tooth and nail to maintain a lion's share of the net worth in the new currency mix, which will be a real bummer to negotiate with King Yuan!

legal eagle's picture

Yes, it is called our Centralized Planned Economy.

sterman7's picture

Here Here.  Just took delivery of some Tears of the moon.  Sooo pretty!

AmazingLarry's picture

I'm long fine Italian suits. It's the only thing real anymore. 

Popo's picture

..and in 10 years you'll have a fascinating collection of funny, retro-looking costumes.

Moe Howard's picture

I'm long Members Only jackets. Do you have any idea how many colors were produced?

Big Corked Boots's picture

At least they looked good. I'm long J. Peterman dusters. Cowboy up.

tarsubil's picture

Thanks, now I have coffee all over myself. I'm going to reak like coffee all day.

TruthInSunshine's picture
by Moe Howard
on Wed, 05/04/2011 - 06:34
#1237285


I'm long Members Only jackets. Do you have any idea how many colors were produced?


by Big Corked Boots
on Wed, 05/04/2011 - 06:56
#1237299


 

At least they looked good. I'm long J. Peterman dusters. Cowboy up.

 

 

+1