Why is George Soros Betting So Big on Gold?

George_Soros_-_Festival_Economia_2012_02Everything you need to know about the billionaire’s recent financial strategy shift, away from stocks and toward gold.

In 1992, George Soros made a bold prediction about the British pound. After assessing global economic trends, Soros placed a $10 billion (US dollar) wager that the pound would soon sharply decline in value. Following that bet, the British currency had one of it’s largest historical drops in an incident now known as “Black Wednesday”. While many investors were left reeling from the loss, Soros’ wager paid off huge, netting him over a billion dollars in profit on a single trade, and forever crowning him as one of the few institutional investors known for making money regardless of market direction or conditions.

In the years since, Soros has continued to amass a fortune of epic proportions, making him one of the 30 richest individuals on the planet. This has caused investors around the world to closely follow the financial decisions of Soros, in attempts to gain an advantage in their own financial portfolios. While some have disagreed with some of the ways Soros spends his money (sometimes donating to leftist political movements), it is impossible to deny his talent for making money.

Therefore, it was no surprise when investors around the world took notice this week, after financial disclosure forms revealed that Soros recently acquired a $264 million stake in the world’s largest gold producer Barrick Gold, along with $123 million of the SPDR Gold Trust. The billionaire also made very a large bet against the S&P 500 index by purchasing 2.1 million put options (which gain value when the stock market drops). The combination of these trades indicate that the legendary investor now sees gold as one of the safest bets currently available, and is bracing himself for an impending drop in the value of stock markets.

These suspicions have been given additional weight, by some recent comments Soros made on the global economy:

“China has a major adjustment problem. I would say it amounts to a crisis,” Soros said in a speech earlier this year. “When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008.” Soros went on to state that a collapse in China’s economy is “practically unavoidable”, and explained that such an event would have global repercussions.

Soros is not the only well-known investor that is bullish on gold right now, Jeff Gundlanch better known at the “king of the bond market” said on a recent investor call that gold could easily reach $1400 per ounce this year, and Dennis Gartman, a closely-followed commodities trader, has recently warmed up to the yellow metal as well.

“I’m not a gold bug. I don’t think the world is coming to an end. But I do think inflation is beginning to pick up incipiently at the margins,” Gartman told CNBC’s Squawk Box. Gartman pointed to the steady rise of commodity prices for grain and livestock, and the pattern of central banks around the world buying those types of assets to stimulate their commodities. “All those things being equal, all those things being summed up have to argue for stronger gold prices,” he said.

With all of these experts turning to gold as a safe and secure asset class in time of financial uncertainty, Gold IRA providers, such as American Bullion have seen a huge spike in recent interest for financial products that are backed by the value and stability of precious metals. Since many see retirement as their most important financial goal, it only makes sense to choose a safe and secure asset with a historical record of outperforming other investments in times of financial turmoil.

If you are interested in learning more about the types of IRA approved precious metal investments that you can add to your retirement portfolio, our team of qualified experts is just a call away. Contact us today at 1-800-465-3472.

Although the information in this commentary has been obtained from sources believed to be reliable, American Bullion does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. American Bullion will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals