George Soros could be brazing for a storm after reducing his holdings on stock and taking his fortunes in the market of Gold. During the first quarter of 2016, Soros purchased the shares of the world’s largest gold miner Barrick Gold worth $264 million. However, this was not a surprise as Soros is known to have made much of his wealth through market speculation. He is commonly known as “the man who broke the Bank of England” after he speculated the British Pound on the Exchange Rate Mechanism to make a profit of $1 billion after the Bank of England was forced to devalue the currency.
The recent move by Soros has been inspired by the fact that he made a prediction about the future of the economy of China. According to George Soros, China is headed for problems after the country chose to promote the country’s growth and shows no commitment to controlling the level of debt. It, therefore, follows that when the stock market is bearish, the price of gold tends to rise because the investors view gold as a “safe haven” for their investment. On the other hand, when the stock market is bullish, people invest in the stocks and reduce their holding in the gold market which reduces demand and ultimately reduces the prices of gold.
Read the full story at http://www.bloomberg.com/news/articles/2016-05-16/billionaire-soros-cuts-u-s-stocks-by-37-buys-gold-producer
In essence, Gold prices tend to rise when people are afraid, and the price of gold has increased more than 20% this year alone. Since his recent prediction, George Soros has also doubled his bet against the S&P 500. He now owns 2.1 million put options on the SPDR S&P 500, a company that tracks the performance of the benchmark index. It follows that put options are some of the ways to show that an investment will lose value.
No one knows what Soros expects the market to decline. In fact, it is not clear if Soros is betting on the decline of the U.S. stock market or he may be trying to hedge his overall portfolio. Only Soros knows the magnitude of the decline he expects and why he thought it was a calculated move. However, it is worth to note that Soros doubled his caution making it either a significant bet against the stocks or the hedge. Earlier in the year, George Soros sounded an alarm on the global financial markets saying that China’s situation only reminds him of the 2008 financial crisis.
According to George Soros, he believes China has a significant adjustment problem which will eventually amount to a crisis on http://www.georgesoros.com/. The move that motivated Soros to invest in Gold was because he understands the disruptive collapse of China’s growth in “practically unavoidable.” According to Raul Moreno, co-founder, and CEO of iBillionaire, Soros has made money during bearish and bullish which is the reason people will trust him.