This Billionaire Just Bought 400% More Gold

This Billionaire Just Bought 400% More Gold
May 18, 2012 | 27 comments | includes: ABX, AUY, GLD, NEM
Shaun Connell via Seeking Alpha

A few weeks back, I wrote an article asking Is George Soros Wrong About Gold? He made waves a couple of years ago by claiming that gold is the “ultimate asset bubble,” only to then invest heavily in gold.

Last year, he made a lot of cuts to his position, easily missing the heavy correction that occurred mid-to-late 2011. But now? He’s getting back in the game.

According to Fox Business, George Soros’ hedge fund just quadrupled it’s holding in SPDR Gold Trust (GLD), and even opened a new position in call options for Newmont Mining (NEM).

This is a pretty big deal for those of us who watch Soros’ actions, as well as anything his fund does. While blind faith is, well, blind, Soros has a record worth making observation worth it, especially sense he’s one of the few people making a big enough deal out of reflexivity — something more investors should obsess over.

But why is Soros buying gold? While I have no way of tapping into his brain, he’s making a choice that should seem relatively basic:

Gold might drop. In the short run, anything is possible, especially as people rush to cash out of Euro fears. But that’s the short run.

Gold will rise. Eventually, we’ll be paying the piper. Inflation without economic creation, losing our dollar reserve status over time, national debt that is completely insane and pointless, fiscal lunacy — these all help spell out a long-term bull market, regardless of the short-term fluctuations.

While I’m strictly in gold and silver bullion, for those willing to take risks for gold and silver miners, the next few months are a great window of opportunity for those looking to buying into Barrick Gold (ABX) and Yamana Gold (AUY).

Over the next few months, we’ll see what the medium term outlook is for gold. If the economy continues to lag, there will likely be more chatter about QE3, if not an announcement itself. This could send gold prices popping back up. Whether or when prices will hit $2,000 is anyone’s guess. The price could continue to drop, and the increase from QE3 and inflationary concerns might not reach 2011 highs for another year.

Either way, I’m continuing to add to my physical position, for reasons I’ve written about in my article on Gold Stocks Vs. Physical Gold and my gold investing newsletter.

Overall, the next two or so months for gold is uncertain, but if prices keep falling I’ll keep buying — because the long-term outlook is unchanged and very bullish.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I own gold and silver and will likely be adding to my position this month.

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