The sales of Gold by George Soros
By: Julian D. W. Phillips, Gold/Silver Forecaster - Global Watch -
George Soros, the billionaire founder of Soros Fund Management LLC, sold most of his holdings in the bullion-backed SPDR Gold Trust and iShares Gold Trust funds in the first quarter, while buying shares of mining companies Goldcorp Inc. and Freeport-McMoRan Copper & Gold Inc. Soros’s fund held 49,400 shares of SPDR Gold Trust as of March 31, compared with 4.721 million at the end of the fourth quarter. The New York-based fund sold all 5 million shares it held in iShares Gold Trust. This amounted to roughly 30 tonnes worth of physical gold held through the custodians, Barclays and HSBC.
Does this mean that he has disposed of the gold holdings he has? Does it mean he is now bearish on gold? After all, it was reported that he bought gold because of his fear of deflation. Does he think that this possibility has now receded? None of the above, for it turns out that he continues to have large allocations to gold investments through owning more gold mining shares and a gold mining ETF. Soros’ fund added Eldorado Gold, Freeport-McMoran Cooper & Gold and Goldcorp to their investments during Q1 2011. Soros bought 301,300 shares of Freeport-McMoRan and 7,600 of Goldcorp. These shares will benefit directly from a long-term appreciation of the gold price through their cash flow from ongoing gold sales. Shareholders will then enjoy the rising capital value of the shares alongside the dividend stream flowing from the sales of gold.
Consider for one moment that the U.S. government was contemplating confiscating physical gold from U.S. citizens and even the flow of gold from gold mining. It would be an easy, one-off exercise to instruct all gold Custodians in the U.S. to hand over their gold to the government, including the custodians of the SPDR Gold ETF and the Gold Trust. With gold shares, all the government could do, would be to instruct gold miners to sell their newly mined gold directly to them. George Soros would then benefit from the continuing operations of these gold companies and their cash flows. We don’t know if this was why the switch is being made, but it would certainly make sense if it were.