SGM Metals LLC: Soros & Paulson DOUBLE DOWN on Gold Ahead of QE3!

Aug. 17, 2012 - PRLog -- todayonline.com reports: [ NEW YORK - Billionaire investors George Soros and John Paulson increased their stakes in the biggest exchange-traded fund backed by gold as prices posted the largest quarterly drop since 2008.

Soros Fund Management more than doubled its investment in the SPDR Gold Trust to 884,400 shares as of June 30, compared with three months earlier, a United States Securities and Exchange Commission filing for second-quarter holdings showed yesterday. Paulson & Co increased its holdings by 26 per cent to 21.8 million shares.

Gold slumped 4 per cent in the second quarter, the biggest such loss since Sept 30, 2008. Prices fell as European Central Bank President Mario Draghi and Federal Reserve Chairman Ben S Bernanke failed to increase stimulus measures, damping the outlook for global growth and demand for the metal as a hedge against inflation. The price is down 0.1 per cent since June 30.

"It's all about easing, and people are waiting for the Fed since investors expect prices will rise," if the central bank announces more bond purchases, said Mr Walter "Bucky" Hellwig, who helps manage US$17 billion (S$21.2 billion) of assets at BB&T Wealth Management in Birmingham, Alabama. "People are willing to hold on to gold to see what the Fed will say."

The metal surged 70 per cent from the end of December 2008 to June 2011 as the Fed kept borrowing costs at a record low and bought US$2.3 trillion of debt in two rounds of so-called quantitative easing. Gold erased its gains this year in May as investors favored sovereign debt and the dollar as economic growth slowed.

Spokesmen for Mr Paulson and Mr Soros declined comment. BLOOMBERG]

The metal surged 70 per cent from the end of December 2008 to June 2011 as the FED kept borrowing costs at a record low and bought US$2.3 trillion of debt in two rounds of so-called quantitative easing. What else needs to be said after that statement? NOTHING! As the FED did what they thought was in the best interest of propping up the multi-trillion dollar fiat fractional reserve nightmare they have engineered, the price of gold & silver climbed astronomically to offset the dollar devaluation that is the prime consequence of the money printing they resorted to. FED prints money, dollar buys less, gold & silver prices adjust upward to offset the dollar devaluation that comes from printing money. This is beginning to sound like a logical loop that starts and ends with the FED printing money and the public bobbing & weaving to protect the value of their savings. These are the savings they have amassed over a lifetime of working the the real world, paying taxes, health insurance benefits for their family, putting anything left in their 401K or IRA in hopes of growing it in Wall Streets hands. Whatever is left over after everyday living expenses is squirreled away into a savings account or their mattress only to be gutted of a little more buying power every time the FED decides their ‘recovery’ begins to fizzle out and they must print more paper money to shock it back into motion.

1 + 1 = 2 * END OF STORY! When you print money you devalue the money that is already in circulation (in your wallet, earned at your job, after taxes were taken out) therefor making monetary commodities, and commodities in general, elevate in purchase price when priced in the devalued currency itself. This elevation in price is the standard economic consequence as the holder of the commodity knows they are accepting an item that is rapidly depleting in value in exchange for their product, thus demanding a higher price to offset the decreased value he will suffer when he is ready to exchange that money for an item he needs at a future date. The longer the down time before the secondary exchange takes place the greater the price the seller of the commodity must ask for, to cover the forecasted loss of purchasing power in the dollar or the currency in question. This unfortunately is not rocket science! Quite the contrary, it is simply basic economics 101 and can even be broken down in even simpler terms when looked at through the lens of supply and demand. When the supply of a currency multiplies gradually, as we saw over the two decade long period through the 80s & 90s, we see that the price of consumer goods and especially precious metals will gradually rise to match the moderate and constant growth of the supply of money. This is why you father always tells you: “when I was a kid, I could go to the ‘5 & Dime’ w/ a quarter & get a Root Beer float, two comic books, a candy bar, a pocket full of gum balls and still have a dime left over”! While you may want to assume your fathers memory is fading away with old age, I can assure you he is in fact telling you the truth! This is the proof that in the US the FED has always walked the razors edge of the inflation game by controlling levers of and they have always worked to expand the volume of paper dollars in circulation intentionally. By expanding the money supply it puts more lendable dollars into circulation which gives the banks a buffet on which to gorge themselves by creating more loans, which in turn creates more construction projects, which leads to more hiring for these projects, which leads to more disposable income, more consumer sales with their new pay checks, leading to more hiring at the retailers to accommodate the increase in sales, this all leads to the stock market reaching new highs and everyone is happy. Until they find out it was all a ponzi scheme as they realize there was never a real economy there at all, instead it was simply a sugar high intentionally created by the FED who created money out of thin air to create a new business cycle.

The fact that gold has risen 70% in value as a free market response to the endless money printing, bailouts and stimulus since the housing crash began is proof that the act of printing dollars to stimulate the economy creates no long term benefit other than the destruction of the purchasing power of the dollar itself. So if the big boys, especially Mr. George Soros himself who is infamous for ‘crashing the British Pound Sterling’ when he made a $1 Billion overnight shorting the British currency, who know a little something about national currencies and them crashing in value are moving heavily into gold bullion and gold related investments now would be a good time to take a page from their playbook and bring it into your portfolio. These guys don’t make a billion dollars overnight by exploiting a currency crisis and forget the signs of a crisis of confidence that appeared to setup that trade to begin with. Instead they take what they learned before and apply it here in the US and believe me they are seeing the same things appear here at home. There is a major crisis of confidence in the dollar itself, not just here in the US, but around the world as well. It would be wise to follow these guys lead as they know what to do when a nations currency fails, you move your assets out of the collateral damage zone and into the safe global currency such as gold & silver bullion and watch the circus from afar. It is a better strategy to PREPARE your portfolio than to attempt to REPAIR your portfolio once the panic begins and the damage becomes profound. Stated differently, an ounce of prevention is worth a pound of cure. Tick, tock.