Soros calls temp top in Gold?

August 17, 2016 at 10:08

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The billionaire investor jumped back into trading this year with a big bet on the precious metal, buying up a 19-million share stake in the world’s largest gold producer, Barrick Gold But in the second quarter, Soros Fund Management sold the majority of his shares in the gold miner and his full stake in mining company Silver Wheaton, according to regulatory filings.

The first-quarter bet on gold looked particularly prescient, as the precious metal has rallied 26% this year. The rise in gold’s price has given an even bigger boost to gold miners, with Barrick shares surging more than 190% this year. Now, Mr. Soros’ change of heart may cause concern for those still bullish on the safe-haven metal.

While gold prices rose for the second day in a row, a “lasting rally however is not yet here as some wonder why Soros cut back on gold,” said George Gero, managing director at RBC Wealth Management.

Gold prices found support from a weaker dollar Tuesday, as the U.S. currency fell to a seven-week low. However, since the start of August, the precious metal has largely gone nowhere.

“The same people seem to be trading up and down,” Mr. Gero said, noting that uncertainty over the Federal Reserve’s plan to raise interest rates and a thin trading environment has kept a cap on recent rallies.

Overt bullishness and stalling gold prices have also sparked concern among some analysts. After hitting a 10-year high in July, net bullish bets on gold by speculative investors have declined for four out of the last five weeks.

A “rut” in gold has made it more susceptible to a correction, TD Securities wrote in a Monday note. “The market is concerned that the Fed will pull the trigger on higher rates this year, which may prompt the resulting higher cost of carry to send vaulted gold into the market. As such, money managers have reduced long exposure and built new shorts, which has prevented the yellow metal from moving out of the current trading range,” the note said.

Gold has gained this year on investor concerns over global growth and negative interest rates. Although economic and political risks remain, traders say that gold may continue to tread water on a lack of news and doubts over the path of future rate increases.

“Gold has underlying stories [to send prices higher], but at this time of year I don’t expect them to give it a lot of traction,” said Ira Epstein, a strategist with The Linn Group.

Mr. Soros remains bearish on the stock market, increasing his bet against the S&P 500, according to SEC filings. The fund still has some exposure to gold, with 240,000 shares of the SPDR Gold Trust ETF.

Barry Rosenstein’s Jana Partners also closed out positions on precious metals, selling all shares of GLD and holdings of the iShares Silver Trust ETF in the second quarter. John Paulson, another notable hedge fund manager who has been historically bullish on gold, sold off some shares of gold companies AngloGold Ashanti and NovaGold Resources, but kept holdings of the GLD unchanged.