By Stephanie Yang
George Soros is getting out of gold.
The billionaire investor jumped back into trading this year with a big bet on the precious metal, buying up a 19-million share stake in the world’s largest gold producer, Barrick Gold But in the second quarter, Soros Fund Management sold the majority of his shares in the gold miner and his full stake in mining company Silver Wheaton, according to regulatory filings.
The first-quarter bet on gold looked particularly prescient, as the precious metal has rallied 26% this year. The rise in gold’s price has given an even bigger boost to gold miners, with Barrick shares surging more than 190% this year. Now, Mr. Soros’ change of heart may cause concern for those still bullish on the safe-haven metal.
While gold prices rose for the second day in a row on Tuesday, a “lasting rally however is not yet here as some wonder why Soros cut back on gold,” said George Gero, managing director at RBC Wealth Management.
Gold prices found support from a weaker dollar Tuesday, as the U.S. currency fell to a seven-week low. However, since the start of August, the precious metal has largely gone nowhere.
“The same people seem to be trading up and down,” Mr. Gero said, noting that uncertainty over the Federal Reserve’s plan to raise interest rates and a thin trading environment has kept a cap on recent rallies.
Overt bullishness and stalling gold prices have also sparked concern among some analysts. After hitting a 10-year high in July, net bullish bets on gold by speculative investors have declined for four out of the last five weeks.
A “rut” in gold has made it more susceptible to a correction, TD Securities wrote in a Monday note. “The market is concerned that the Fed will pull the trigger on higher rates this year, which may prompt the resulting higher cost of carry to send vaulted gold into the market. As such, money managers have reduced long exposure and built new shorts, which has prevented the yellow metal from moving out of the current trading range,” the note said.