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Soros Reports Over $239mm In Gold Positions, Buys $25mm In Call Options On Juniors


In a 13-F release issued by the SEC after market close yesterday, it was reported that Soros Fund Management LLC, founded and chaired by billionaire financier George Soros, significantly increased its gold related holdings, most notably, through the purchase of over $25 million dollars worth of call options on the GDXJ Junior Gold Miners index.

This stunning move by one of the world’s top performing hedge funds, suggests a powerful surge ahead for gold equities. It should be noted, that in the forty years prior to 2010, the Soros Fund averaged a 20% annual rate of return.

A breakdown of the 13-F data indicates that during the first quarter, the Soros Fund:

1. Maintained a $32mm stake in individual miners.

2. Added a staggering 1.1 million shares of GDX to its holdings, at a reported price of $37.84 per share. Total Soros Fund GDX holdings now stand at 2.666 million shares, at a reported value of over $100,000,000.

3. Reduced it’s long position in the GDXJ Junior Miners Index fund, from 1.998 million shares to 1.2 million shares—only to turn around, and purchase 1.510 million call options on the same index, at a reported value of $25,200,000.

4. Lastly, the fund reduced its stake in the GLD gold fund from 600k shares to 530k shares, for a total reported value of $82,000,000.

In summary, as of May 15th, 2013, Soros Fund Management LLC reported owning over $239.2 million in gold related positioning, with over $25 million dedicated to call options on junior mining stocks.
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Bottom Line: While debate continues as to how far gold and gold equities will continue to drop, the Soros Fund is lightening up on physical gold in exchange for gold mining equities and call options on the extremely volatile junior mining stocks.

There couldn’t be any stronger indication by the fund as to its beliefs about the timing of this bottom (outside of selling everything and going all-in on call options of course).

It remains to be seen whether these positions will end up in the green or not, but with a forty year track record of 20% annual returns, I’ll be betting on the Soros Fund.
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To view the entire Q1 2013 13-F filing as reported by Soros Fund Management LLC, visit: SEC.gov

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Tekoa Da Silva
Bull Market Thinking

There couldn’t be any stronger indication by the fund as to its beliefs about the timing of this bottom (outside of selling everything and going all-in on call options of course).

What does "selling everything and going all-in on call options" indicate about the funds belief on bottom timing? He writes this as though the conclusion were obvious, I'm just not seeing it.

call options EXPIRE WORTHLESS after a period of time.

So buying calls means that he loses everything invested (potentially) if he calls it incorrectly. Whereas owning the gold directly you have a much longer time frame for it to increase and still show profitability.

barrytrot wrote:call options EXPIRE WORTHLESS after a period of time.

So buying calls means that he loses everything invested (potentially) if he calls it incorrectly. Whereas owning the gold directly you have a much longer time frame for it to increase and still show profitability.

Thank you. I think I'll stick with physical....

Verbane wrote:

There couldn’t be any stronger indication by the fund as to its beliefs about the timing of this bottom (outside of selling everything and going all-in on call options of course).

What does "selling everything and going all-in on call options" indicate about the funds belief on bottom timing? He writes this as though the conclusion were obvious, I'm just not seeing it.

A large portion is in junior mining stocks. Mining stocks are only worth holding if the price of gold rises enough for the miners to increase their profit margin. That means Soros is going long both in his position and with his expectation that miners will become increasingly profitable as compared to their cost of production, and likely believes miners are the more profitable play vs. the metal itself. They are very undervalued comparatively afterall, but miners won't be going up if gold doesn't. Then again, maybe he just wants to hold them so he can sell it all later and knock them down. This guy doesn't always play nice.

I believe Eric Sprott also picked up a sizeable position in miners last month.

Verbane wrote:

There couldn’t be any stronger indication by the fund as to its beliefs about the timing of this bottom (outside of selling everything and going all-in on call options of course).

What does "selling everything and going all-in on call options" indicate about the funds belief on bottom timing? He writes this as though the conclusion were obvious, I'm just not seeing it.

The author is showing just how bullish a position Soros is taking. He is saying Soros could be even more bullish, but in a suicidal way (as Barrytrott pointed out).

The message I get from all this is there is a greater return potential in junior miners than there is in the bullion itself. In other words, Soros thinks gold is still a little overpriced and may dip even more, but soon the price of gold will rise to the extent the mining stocks will rise with it.

Conclusion: Gold junior mining stocks are potentially bottomed while gold bullion has a little ways still to dip.

Anyone agree with me?

One word: BUY!

Of course, do you own due diligence (DYODD).

InfleXion wrote:

Verbane wrote:

There couldn’t be any stronger indication by the fund as to its beliefs about the timing of this bottom (outside of selling everything and going all-in on call options of course).

What does "selling everything and going all-in on call options" indicate about the funds belief on bottom timing? He writes this as though the conclusion were obvious, I'm just not seeing it.

A large portion is in junior mining stocks. Mining stocks are only worth holding if the price of gold rises enough for the miners to increase their profit margin. That means Soros is going long both in his position and with his expectation that miners will become increasingly profitable as compared to their cost of production, and likely believes miners are the more profitable play vs. the metal itself. They are very undervalued comparatively afterall, but miners won't be going up if gold doesn't. Then again, maybe he just wants to hold them so he can sell it all later and knock them down. This guy doesn't always play nice.

I believe Eric Sprott also picked up a sizeable position in miners last month.

I agree. I think this is a great sign gold will go up to the point the miners will be sitting in the proverbial catbird's seat. It is an indicator of strong demand in the future.