If you got sucked into the Ackman vs. Icahn brouhaha Friday, you
might have missed the news that George Soros was unwinding a hefty
chunk of his position in GLD.
While the two activist investors were grabbing the headlines,
another activist investor in his own right, George Soros, was
making headlines for his large-scale selling of his position in the
gold bullion ETF SPDR Gold Shares (NYSEArca:GLD).
The move by Soros-which was not matched by another notorious GLD
long, John Paulson, was announced on a day when gold fell below the
$1,600 mark for the first time since autumn.
Investors may assume the two are related, as the near-$30 fall
in gold prices on Friday is just the latest drop for the yellow
metal, which has fallen 11 percent since September.
Assuming that Soros' selling has had any impact on gold doesn't
line up with the evidence.
Sure, his positions are widely followed and his opinions closely
monitored, but the fact is that his GLD position was a drop in the
bucket for GLD and the commodity it tracks.
To see just how little Soros' position mattered to the market
for GLD shares, consider this:Soros sold 700,000 shares of GLD
during the fourth quarter, which constituted 55 percent of his
position in the fund.
During the fourth quarter of 2012, GLD had net
of $3.5 billion. In other words, his liquidation did little to
impact the price of GLD, let alone the massive market for gold.
Now, one could argue that Soros' GLD sales may have sent a
signal to investors, and the year-to-date flows out of GLD to the
tune of $1.4 billion as well as the 4 percent year-to-date decline
in the metal would support that case.
The capital markets desks of money managers around the Street
likely saw Soros selling that gold in the fourth quarter, so many
could be playing "catch-up" and unloading their own stakes of
But even drawing that conclusion takes a leap of faith.
For one, investors have long been fighting the dynamic
correlation of gold to different economic indicators, including
CPI, GDP and M3 money supply, as well as rates in the capital
markets, including USDX, Libor and 10-year Treasury rates) to no
If gold investors with any semblance of conviction in their
position were influenced by Soros-a guy who said gold was in a
bubble at $1,200-I would be shocked.
And when you consider just how insignificant Soros' GLD position
was, it makes it even harder to believe his GLD position has any
influence on the market. The value of the Soros family investment
fund is roughly $24 billion, and the 1.3-million-share position in
GLD represented less than 1 percent, which is little more than a
rounding error in the grand scheme of things.
The point is:Soros never purported to be a gold bug, and he
allocated to it accordingly.
The fact that the announcement of Soros' liquidation happened on
a day when gold fell under $1,600 should therefore be taken with a
grain of salt-or even two.
If investors are looking for signals about a real turn in gold
prices, perhaps following someone with some real skin in the game,
like John Paulson, may provide a better gauge.
Looking at a delayed snapshot of a hedge fund manager's position
to get a read on the market is probably a fool's errand regardless,
but in the case of Soros, it is likely much ado about nothing.
At the time this article was written, the author had no
positions in the securities mentioned. Contact Paul Baiocchi at
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