Tuesday, May 17, 2016

George Soros dumps stocks to buy gold as calls for a return to gold standard accelerate

Lately we have been talking about billionaire Wall Street investors and fund managers who have suddenly gotten on the gold bandwagon for the first time in five years, and on May 16 we can add another name to this list...

George Soros.

George Soros is an extremely polarizing individual who tends to get involved in sovereign politics despite the fact his allegiances lie elsewhere.  But the one thing that can be said about his investment acumen is that when it comes to the direction of money, his calls are usually in line with future outcomes.

So when the hated billionaire decides to not only dump his equity holdings in the stock market, and buy gold with the expectations of either a new financial collapse or perhaps something greater, it is a signal that he knows something many others do not.

Soros also more than doubled his SPY puts to 2.1 million shares, or a value of $431MM, up from $205MM the previous quarter. 
But more notably was Soros' significant return to gold, after he acquired 1.7% of Barrick, making it the firm’s biggest U.S.-listed holding. This marks a prominent return to gold for Soros, who dissolving his stake in Barrick in the third quarter of last year. 
Soros also disclosed owning call options on 1.05 million shares in the SPDR Gold Trust, an exchange-traded fund that tracks the price of gold. It was unclear if Soros has been influenced by Druckenmiller who earlier this month at the Sohn Conference, called gold his largest currency allocation as central bankers experiment with the "absurd notion of negative interest rates." - Zerohedge
Yet besides the folly of central banks around the world, there may be another purpose behind jumping into gold and gold miners by the former raider who nearly bankrupted the British Pound so many years ago.  And that purpose may be found in the ever rising look towards a return to the gold standard in some form or fashion, which has been accelerating since the Fed, ECB, and BOJ have called for an end of cash, and move towards negative rates.
When times are tough, new economic theories get a better hearing. Maybe some old ones, too. 
The gold standard is one of the oldest ideas about money, but the hardest of hard-money hawks sense an opening to breathe new life into it. Decades ago, the amount of cash circulating in a country was often limited by the stash of bullion held in its coffers. 
Especially since 2008, developed-world policy has headed in the exact opposite direction, expanding the powers of central banks to stoke growth. Helicopter drops of money, potentially the next new thing, would be a giant leap further. 
For those in the U.S. who see much risk and little benefit in the current course, gold is still a rallying point. And their audience may be growing. 
“The fringe has become the mainstream,” said Jesse Hurwitz, a U.S. economist at Barclays Capital in New York. He sees the gold standard as a bad idea but “something we’ll increasingly talk about.” - Bloomberg

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