Soros Signals Gold Bubble as Goldman Predicts Record

George Soros is helping drive up gold prices by doubling his bet in a market even he considers a “bubble” as Goldman Sachs Group Inc., Barclays Capital and HSBC Holdings Plc predict more gains before it bursts.

Soros Fund Management LLC, which manages about $25 billion, increased its investment in SPDR Gold Trust, the world’s largest exchange-traded fund for the metal, by 152 percent in the fourth quarter, a Feb. 16 Securities and Exchange Commission filing shows. While prices have fallen 9.2 percent since reaching a record on Dec. 3, 15 of 22 analysts in a Bloomberg survey say gold will reach a new high, with the median forecast predicting a 17 percent advance to as much as $1,300 an ounce this year.

“When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment,” Soros said at the World Economic Forum’s annual meeting in Davos, Switzerland, in January. “The ultimate asset bubble is gold,” he said.

In a Jan. 28 Bloomberg Television interview, the 79-year- old billionaire recalled that former Federal Reserve Chairman Alan Greenspan warned of “irrational exuberance” in financial markets three years before the technology bubble burst in 2000. The Standard & Poor’s 500 Index rose 89 percent in the period. Buying at the start of a bubble is “rational,” Soros said.

Gold’s fourfold rally since the end of 2000 has also attracted money managers John Paulson, Paul Tudor Jones and David Einhorn. Paulson’s Credit Opportunities Fund soared almost sixfold in 2007 by betting that subprime mortgages would plummet. Einhorn said in October that his Greenlight Capital Inc. bought gold to bet against the dollar.....Read the entire article.


Check out the new "Trend TV"



Share

Gold Falls on Concern Obama Bank Plan May Erode Commodity Trade

Gold futures dropped to a one-month low on speculation that President Barack Obama’s plan to restrict U.S. bank trading will reduce investment demand for commodities, including precious metals. The proposal to limit risk taking by banks, preventing investments in hedge funds and private equity pools, may cost Goldman Sachs Group Inc. $4.67 billion in revenue next year, JPMorgan Chase & Co. said in a report. Investors poured $60 billion into raw materials in 2009, according to a Barclays Capital survey, fueling the biggest commodity rally since 1979.

“President Obama’s restrictions on bank trading could undermine the gold market, if it prevents investment from moving into risk markets,” said Tom Pawlicki, an MF Global Inc. analyst in Chicago. “Gold has correlated well with risk markets in the past year, and yesterday’s events sent investment into Treasuries rather than gold and stocks.” Gold futures for February delivery dropped $13.50, or 1.2 percent, to $1,089.70 an ounce on the New York Mercantile Exchange’s Comex unit, dropping 3.6 percent this week.

Earlier, the most active contract touched $1,081.90, the lowest price since Dec. 23. Gold fell for the third straight day, the longest slump in six weeks. Last year, investment in the SPDR Gold Trust, the biggest exchange traded fund backed by the metal, surged 45 percent to as much as 1,134 metric tons. The total value of the fund grew 85 percent to $40 billion. Gold futures jumped 24 percent in 2009, the ninth straight annual gain, touching a record of $1,227.50 last month in New York.....Read the entire article.

Just click here for your FREE trend analysis of GLD

Share