Hey! George Soros quit gold – well, not really...
ONE INTERESTING aspect of the 'psychological' factor in gold, writes Greg Canavan in The Daily Reckoning Australia, is the way the mainstream media report on it.
For example, countless news outlets gleefully reported on George Soros's sale of gold via the big gold exchange-traded trust fund, the GLD, as being bearish for gold.
But what they neglected to report on was Soros' concurrent purchase of gold equities and options on junior gold miners. According to regulatory filings, he has around US$240 million exposure to gold and gold related investments as at May 15th. That's hardly a bearish sign. See this report if you want the details. See this gibberish if you don't.
Clearly, Soros is just responding to the terrible sentiment towards the gold sector by buying. It's standard contrarian stuff. Yet the media twist it into a bearish gold story.
Whatever. Speaking of contrarian, there could well be a contrarian opportunity emerging in the mining services sector later this year. That's the argument we've been making to subscribers of Sound Money. Sound Investments recently.
The sector is suffering the effects of the mining slowdown. There are profit warnings all over the place. In just the past few weeks, we've heard bad news from five and more service providers.
They are all suffering the impact of mining companies pulling back their investment spending. That's been led by concern that China's appetite for commodities is set to be much weaker in the years ahead.
But as often happens, what starts as a solid fundamental reason to sell a sector morphs into irrational panic. A falling share price encourages more selling as investors just want to 'get out' at any price. You're seeing it now in the gold sector. Investors will probably see it in the mining services sector in the months ahead.