George Soros is Making Bets on Gold: Should You, Too?



Soros is diving into gold

George Soros has joined other billionaire investors such as Stan Druckenmiller and Ray Dalio who are investing in gold. Soros is shorting the S&P 500 (SPY) and buying gold and gold miners. He has doubled his bet against the S&P 500 through a share put option. Diving into gold again reiterates his bearish view on the economy and a dash toward safe-haven assets.

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Cautious on US outlook

During 1Q16, Soros purchased shares of Barrick Gold (ABX), the world’s largest gold miner. He acquired 1.7% of the company. He also disclosed that he owns call options on 1.1 million shares in the SPDR Gold Trust (GLD). GLD is an ETF that closely tracks gold prices.

Barrick Gold has been selling its non-core assets and paying off its debt consistently. Its attractive growth profile and sliding all-in sustaining costs have also been supporting the stock. This has attracted retail buyers. ABX stock has risen 175% since the start of the year through June 15, 2016.

Other concerns

Other gold miners such as Newmont Mining (NEM), Iamgold (IAG), Kinross Gold (KGC), and Yamana Gold (AUY) have also been rising spectacularly since the start of 2016 due to the strength in gold prices. Operationally or financially more leveraged names such as Kinross and Iamgold have outperformed their peers.

Among other concerns, Soros is worried about a Brexit (possible British exit from the European Union). He’s also concerned about China’s financial situation and a global contagion. That’s why Soros Fund Management is buying gold and stakes in gold mining companies.

Investors who share Soros’s concerns are diversifying parts of their portfolios in gold and gold stocks. Diversification into gold is also useful since its correlation to other assets such as equities is very low.

Now let’s see if a Brexit could be the next catalyst for gold.


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