Gold News

George Soros Opts to Buy Gold But Asian Selling Continues, "Crowded Gold Trade" Needs to Lose "Weak Leveraged" Investors

SPOT WHOLESALE prices to Buy Gold bounced $10 per ounce from a new 5-month low at $1527 in London trade Wednesday morning, rallying as the Euro, stock markets and commodity prices also retraced their fresh losses.

Spanish and Italian bond yields both eased back but held above 6% as Spain's prime minister Mariano Rajoy warned the Madrid parliament of "a serious risk that [the markets] don't lend to us or that they lend to us only at astronomical prices."

President Karolos Papoulias of Greece – now losing €700m per day in bank deposits according to senior figures – today appointed a judge to act as interim prime minister ahead of re-run elections now due on June 17.

"Selling continued in Asia today across all exchanges for gold and silver and palladium," says a note from Swiss refinery and finance group MKS's Far Eastern office.

"We have given up waiting for a bounce," says another Singapore dealer. "The market will do what it needs to do to clean out the weakly margined before it becomes healthy once again."

New data from March 31st yesterday showed hedge-fund legend George Soros opted to Buy Gold in the first quarter of 2012, more than trebling his clients' stake in the big New York-listed SPDR Gold ETF.

Fellow billionaire hedge-fund manager John Paulson – who represents the largest single holder of SPDR Gold shares – maintained his clients' stake, leaving it unchanged for the first time since June 2011 at the equivalent of 53.8 tonnes.

Since end-March, prices to Buy Gold have now lost 8%. The total loss from Sept. 2011's record high now reaches to 20% – "the common definition of a bear market," as Bloomberg notes.

"This is an example of our old friend 'the crowded trade'," says John Ventre, manager of Skandia's Spectrum and multi-asset funds, quoted by the UK's Investment Week.

"Very many investors now own the asset, even though the market is in fact incredibly small. As investors – particularly levered ones like hedge funds – take losses in other parts of their portfolio, then selling pressure emerges across the board as investors pull their horns in."

The spot-price to Buy Gold "is not far from our downside target zone at the September and December 2011 lows," says the latest weekly report from technical analyst Axel Rudolph at Commerzbank in Luxembourg.

"Over the next few days a minor bounce back towards the breached 2008-12 uptrend line is likely to be seen before another down leg rears its head, probably by next week."

Like gold, Silver Bullion prices also bounced from new 5-month lows Wednesday morning, adding 50¢ from $27.20 per ounce.

On the Hong Kong stock market today shares in Chow Tai Fook Jewellery Group – the world's biggest publicly listed jewelry retailer – lost 10% to hit all-time record lows.

Overall, the city's Hang Seng Index fell for the 9th session in ten, as US crude oil dropped through $93 per barrel and copper lost a further 1.5% on the day.

"Gold's slide has to be put in perspective with other commodities," says Walter de Wet at Standard Bank in London, pointing to the 1-month drops in crude oil, platinum and copper.

While prices to Buy Gold have lost 7%, "Even [emerging-market] currencies such as the Brazilian Real and the South African Rand have depreciated 7.9% and 5% respectively against the US Dollar.

"Liquidation is taking place irrespective of market fundamentals."

"Jewelers don't know what to do," says Ronald Leung, head of Hong Kong's Lee Cheong Gold Dealers, speaking to Reuters.

"Maybe when the price has stabilised at some levels, they will start to reenter the market. There's a bit of scale-down buying."

Some wire reports said Wednesday that demand to Buy Gold had picked up despite a fresh record low in the Indian Rupee capping the new lows in the world's #1 consumer market.

"Amid drying-up demand in off season, [lower Gold Prices ] could ease the burden on [India's] import bill," says NDTV, blaming the Rupee's sharp fall on the currency markets on its heavy import bill.

On top of this year's quadrupling of import duty on Gold Bullion, "Gold imports could be discouraged by creating opportunities for more productive investments in the economy," writes RV Kanoria, president of the Federation of Indian Chambers of Commerce & Industry (FICCI) – fresh from urging the privatization of India's coal-mining sector – in the Economic Times of India today.

"A better investment climate through focus on reforms will steer investors to look towards ventures than just stock up gold."

Looking to Buy Gold today? Make it simple, secure and cost-efficient like nowhere else using world #1 BullionVault to get the safest gold at the lowest prices in Zurich, Switzerland...

The London Gold Market Report is the daily market review from BullionVault, the world's largest physical gold and silver market for private investors. A full member of professional trade body the London Bullion Market Association, BullionVault publishes the LGMR every day that the market is open, bringing you insider comment and analysis from the very center of the world's $240 billion-a-day physical gold trade, and putting the latest gold price action into its wider financial and economic context

See full archive of the London Gold Market Report.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn



Market Fundamentals