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Soros: Nothing Is Very Safe, Including Gold

Commodities / Gold and Silver 2010 Sep 16, 2010 - 07:13 AM GMT

By: Dian_L_Chu

Commodities

Best Financial Markets Analysis ArticleSpot gold Tuesday hit a record $1,274.75 an ounce,drifted lower on Wednesday as the dollar surged 3% against the yen when Japan intervened in the currency market for the first time in six years. The yellow metal quickly found support at just below $1,270 an ounce, still near its record high.


Gold was also weighed down by fresh comments from billionaire financier George Soros. In an exclusive interview on Sep. 15 with Thompson Reuters (clip below), Soros says that gold is the ''ultimate bubble,' and that "this is a period of great uncertainty so nothing is very safe."

“[In a deflationary environment], Gold is the only actual bull market currently. It just made a new high yesterday. In the present circumstances that may continue. It will be very interesting to see if there is a decline in the next few weeks because practically everything that makes a new high almost immediately afterwards reverses and disappoints.”

“I called gold the ultimate bubble which means it may go higher but it’s certainly not safe and it’s not going to last forever.”
Soros first made the "ultimate bubble" comment on gold back in January at the World Economic Forum in Davos, Switzerland.

However, his hedge fund--Soros Fund Management LLC--still held 5.24 million shares of the SPDR Gold Trust (GLD), a stake worth about $650 million, and equity holdings in miners of gold and other minerals worth almost $250 million as of June 30. Soros was the third-largest fund in the Gold Trust ETF at the end of the second quarter.

So, it seems Mr. Soros still sees upside in gold, but was warning of the metal's volatility instead of a bubble burst. Fundamentally, the current global macro environment--prospect of a synchronized slowing growth coupled with ongoing financial turmoil-- and supply/demand are also quite supportive of gold.

From a technical standpoint (see chart), $1,300 range looks to be the next resistance with support at around $1,255.

Disclosure: No Positions

Dian L. Chu, M.B.A., C.P.M. and Chartered Economist, is a market analyst and financial writer regularly contributing to Seeking Alpha, Zero Hedge, and other major investment websites. Ms. Chu has been syndicated to Reuters, USA Today, NPR, and BusinessWeek. She blogs at Economic Forecasts & Opinions.

© 2010 Copyright Dian L. Chu - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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