Keeping Score: John Paulson Right About Gold & George Soros Wrong…So Far (GLD, JJC, UUP, IAU, GDX)

January 9, 2012 4:16pm NYSE:GDX

Jonathan Yates: As detailed in previous articles on www.emergingmoney.com, uber-investors John Paulson and George Soros, both worth billions, took different positions on gold recently. John Paulson sold off part of his SPDR Gold Shares (NYSEARCA:GLD) holdings, the exchange-traded fund for gold,


while George Soros was buying.

GLD fell more than 5% last month.  It would seem that the euro zone debt crisis would have investors fleeing to gold as financial institutions are tottering and the bond market looks crowded. In addition, central banks are loading up on gold at a rate not seen since Bretton Woods. But traders dumped gold for dollars instead.

Remember, gold is pure speculation.  Over 90% of every ton mined is for investment purposes only.  As pointed out in an article in the Financial Times, gold is an “inert metal” in every meaning of the word.

Now, with economic growth slowing in China and India, gold purchases are falling from individual consumers.

We see this in the relatively correlated way gold is trading with copper (NYSEARCA:JJC), which is also down for the year as a result of decreasing demand from Asia, particularly China.  This has been detailed in articles in both The Wall Street Journal and the Financial Times.

As a result, rather than buy gold, investors are loading up on the US dollar, seeking immediate liquidity and reserve currency status.  Even legendary investor Jim Rogers, who is short both American and European stocks, is long on the U.S. dollar.  While gold has fallen over the last month, PowerShares DB US Dollar Index (NYSEARCA:UUP) is up.

Written By Jonathan Yates From Emerging Money

Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.


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