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Showdown in Gold Gulch: Super-Rich Investors Don’t Agree

Written by Gary North on December 30, 2011

George Soros says gold is in a bear market. So do a lot of other traders. Yet commodity futures traders think it’s headed higher.

George Soros, the billionaire who two years ago called it the “ultimate asset bubble,” cut 99 percent of his holdings in the first quarter, Securities and Exchange Commission data show. Hedge fund managers John Paulson, Paul Touradji and Eric Mindich also sold bullion this year. While speculators in New York futures are the least bullish (.MMGCNET) in 31 months, the median estimate in a Bloomberg survey of 44 traders and analysts is for prices to rally as much as 40 percent to $2,140 an ounce in 2012.

Then there are options traders. These are highly leveraged traders. They are bullish.

“Gold became very overbought,” said Charles Morris, who oversees about $2.2 billion of assets at HSBC Global Asset Management in London and cut his bullion holdings to 6 percent at the end of November from 15 percent six months ago. “It will at least consolidate following this almighty rally. When the new bull market arrives, maybe a year or so away from now, then gold will once again prove to be a leading asset.”

What’s the average guy to believe?

Dennis Gartman, the economist and author of the Suffolk, Virginia-based Gartman Letter, said Dec. 13 that traders were witnessing the “death of a bull.” He sold the last of his gold the previous day and said Dec. 23 his outlook was neutral. The “megatrend” in bullion is “in all likelihood near the end of the road,” Markus Mezger, co-founder of Zug, Switzerland-based Tiberius Asset Management AG, which manages about $2.5 billion of assets, said in its 2012 outlook report on Dec. 23.

On the other hand,

“Gold is going to go higher, but it’s not going to go in a straight line,” said Martin Murenbeeld, the 67-year-old chief economist at Toronto-based DundeeWealth Inc., which manages about $100 billion in the Dynamic Mutual Funds. “Gold has given positive returns, but it doesn’t necessarily do it in the way that gives comfort, and that makes people nervous.”

It is still not back to its 1980 level.

Gold’s high in September has yet to exceed previous records when adjusted for inflation. The metal peaked at $850 in 1980, equal to $2,335 today, according to a calculator on the website of the Federal Reserve Bank of Minneapolis.

Then there are central banks.

The drop in gold may spur more buying from central banks, putting a “floor” under prices, said Adrian Day, who manages about $170 million of assets as the president of Adrian Day Asset Management in Annapolis, Maryland. The banks may add 600 tons to reserves next year, the most since at least 1970, according to Goldman Sachs Group Inc., which on Dec. 1 said bullion would reach $1,940 in 12 months.


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2 thoughts on “Showdown in Gold Gulch: Super-Rich Investors Don’t Agree

  1. All I can say as a lay person in gold is that when the pros buy low and sell high to take the profit, whose money do you think they are taking? It is the sucker who just bought in. Gold does not produce any work, product, commodity because it has no intrinsic value; it is only the bus that everyone rides to fleece others of their cash.

    "in the end, they will cast their gold into the streets."

  2. It is obvious you are a lay person with credible knowledge, however; gold will rise significantly higher than you might imagine for a period of time until about one to three years after the dollar crashes and our government debt bubble bursts; at which time will be the point of unloading! It is already written in the shrewd and calculated plans of the Feds! My guess is that in 2-3 years, gold will hit around $4,000 + an ounce, with silver right up there. But there is another investment that appears to be postured for a return much higher as a result of global economics, historical indicators, and supply and demand (with regards to all industrialized habitats). Most people haven't a clue!