[Emirates 24/7] "Gold is the ultimate bubble. It is certainly not safe," George Soros, billionaire investor and legendary currency speculator, said at the beginning of this year and then reiterated his opinion in September this year.But in stark contrast to his 'bubble' comments, his fund announced yesterday (November 15) that it increased gold positions during the third quarter.
According to Marketwatch, Soros held 4,697,008 shares of the SPDR Gold Trust and 705,000 call options on the gold ETF at the end of September, its regulatory filing showed. Soros also owned 5,000,000 shares of the iShares Gold Trust at the end of the third quarter, according to the filing. Three months earlier, Soros held 5,244,697 shares of the SPDR Gold Trust, a portion of which was a shared position. The firm held no shares of the iShares Gold Trust at the end of June, according to the filing.
Soros had said in September he expects a repeat of the historical pattern of bull runs in assets like gold ultimately hitting records, and then suddenly reversing. Gold is currently the only bull market, Soros said, adding that it may continue to rise but "it's not going to last for ever." He said it will be interesting to see if gold declines in the coming weeks.
Last week, his concerns were made conspicuous by a sudden and dramatic decline in gold prices. A bevy of worries spread through volatile markets and gold, which was on a record-breaking spree of making lifetime highs almost on a daily basis, dropped $38 an ounce, leading once again to heated debates about whether or not gold is in a bubble.
While the weekly decline amounted to just 2.7 per cent on the over $1,400/oz that the yellow metal had clocked in the week before, analysts who argue that it isn't prudent to pay more than $1,000/oz seem to be gradually coming out of the woodworks now.
Analyst Alex Dumortier, using data from the World Gold Council and precious metal dealer Kitco, argues that if we look at inflation-adjusted gold prices going back to 1851, the yellow metal has generated a historical average return of 0.7 per cent per annum.
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even that small positive real return is a bit of a mirage resulting from the powerful gold rally we've witnessed. Indeed, as recently as 2005, gold's average real return over 154 years was zero," he says arguing that gold is an inert asset and over the very long term, it is unsuitable as a store of value and could be heading for a big devaluation.