Gold: Was Paulson Right to Sell or Soros to Buy?

George Soros was a major buyer of SPDR Gold Trust (GLD) in late 2011. He increased his position in GLD by +13% during the third quarter. Soros also initiated put and call positons, worth $18.97 million and $22.92 million respectively. Jeffrey Vinik’s Vinik Asset Management was also bullish on GLD. The fund upped its stake in GLD by +297% during the third quarter, to $533.45 million.

“Even though gold closed the year at a six-month low, Soros and other gold bulls such as Steve Cohen of SAC Capital will be rewarded if Federal Reserve Chairman Ben Bernanke launches into a third round of quantitative easing,” writes NASDAQ. “When this happens, all dollar-denominated commodities, including oil, United States Oil (USO), and silver, iShares Silver Trust (SLV) will rise with gold, just as happened with the last quantitative easing campaign in 2010.” Some people, like Jim Rogers, the former partner of George Soros as the Quantum Fund, say that a third round of quantitative easing, so-called QE3, has already begun. Others are less optimistic.

John Paulson’ Paulson & Co., for instance, sold off -36% of its position in GLD during the third quarter. The thing is that “there is no fundamental economic demand for gold – over 90% of every ton mined is for investment, not industrial, purposes,” writes NASDAQ. So, it is only worth what investors are willing to pay for it. “If gold was an investment rather than a speculation, it would be making long-term moves related to the equity markets.  It does not, however, even though rising demand from consumers in China, India and other parts of Asia provide much support.”