For those unfamiliar, George Soros is a famous stock investor and currency speculator. Known as “the Man Who Broke the Bank of England,” he reportedly made $1 million during the 1992 currency crises in the UK. Mr. Soros has lately taken to scooping up piles of gold. If someone so successful is making moves to buy gold coins and other forms of the precious metal, shouldn’t we all?
Mr. Soros has repeatedly stated that the increase in gold’s price is excessive. After those claims were made, his Soros Fund Management proceeded to invest more money in gold, which does not make much sense to casual observers. Before we make any large gold purchases, we should understand the method behind this seeming madness.
Here is where the excellent speculation skills of Mr. Soros come into play. He believes that the worldwide financial system is disintegrating and he does not see any possible short-term solutions. He refers to the system as being on “life support” and claims that the bottoming out is yet to come.
Though Mr. Soros may believe that gold is a bubble, that may be the exact reason why he is investing in the precious metal. He himself reports that he purchases a bubble when he sees it because that is how he makes money. During late 2009, he doubled his gold holdings even as the price of gold was climbing.
As the dollar and other forms of currency decline in value, George Soros is putting his bets on gold as a safe haven. By purchasing lots of gold, this investor effectively drove its price even higher. He believes that purchasing at the start of a bubble is a “rational” decision. Those of us who follow the logic of this famous speculator would be well advised to follow suit before it is too late.