Battle Of The Titans: Soros Sells Gold ETF While Paulson Buys – Who’s Right?

Ulli Gold ETFs Contact

The IB Times had this to say on the apparently opposing views of the sale and purchase of the Gold ETF (GLD) by Soros and Paulson:

The confirmation of George Soros ETF gold sale has again garnered much media comment. Soros’ $28 billion fund decreased its holdings of the SPDR Gold Trust, the exchange traded fund.

Soros had bought gold to protect against possible deflation, though his fund now believes there is a reduced chance of such a condition, the Wall Street Journal recently said, “citing people close to the matter”.

Should Soros and his fund think that inflation is now a greater risk than deflation then it is curious that they would sell all their ETF holdings. It is also curious as Soros is on record regarding having serious concerns regarding the outlook for the euro and the dollar and the dollar as reserve currency of the world.

There is of course the precedent of other hedge fund managers , such as David Einhorn, who have also sold their gold ETF holdings but bought physical bullion in allocated accounts due to a concern about counter party and systemic risk.

It is quite possible that Soros’ fund has adopted a similar strategy.

This would allow Soros to discreetly accumulate bullion away from the public and media spotlight that result from SEC filings.

Paulson & Co., the $36 billion hedge fund founded by John Paulson kept its largest holding – $4.41 billion in the SPDR Gold Trust. Paulson’s belief in gold is seen in the fact that those who buy his fund can have their stakes denominated in gold rather than in dollars, meaning the value of their investment rises and falls with the price of bullion – lessening exposure to the dollar.

Paulson, unlike Soros, is on record as having purchased gold to protect against inflation.

PIMCO, the largest bond fund in the world, are also increasingly allocating funds to gold in their global equities portfolio. “The largest position in [our] fund is gold, which we think is a very good form of protection against what can go wrong,” said Anne Gudefin, PIMCO’s global equities portfolio manager, told Fortune magazine May 12.

[Emphasis added]

There you have it. Soros may have very well sold the ETF to buy bullion in order to avoid SEC filings. No one knows for sure.

I side with Pimco’s statement that gold “is a very good form of protection against what can go wrong.” I would add that, when viewing the current global economic landscape, a lot things not only can go wrong but will go wrong – the timing of it is just the unknown.

Disclosure: Holdings in GLD

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