Soros hedge fund bets on demise of the euro
Tuesday 02 March 2010
George Soros, one of the world's leading investors, believes the euro "may not survive" and has publicly declared that he is buying into gold – even though he says he considers it a "bubble".
Soros Fund Management, along with other hedge funds, has been accused of aggressively short selling the euro to destabilise it. Both the Greek and Spanish prime ministers have condemned "speculators" for undermining the currency.
Some observers say that traders and hedge funds have bet nearly $8bn against the euro as very low interest rates have made funding such massive punts more feasible. Concerns have been expressed about the abuse of the credit default swaps market by shorters – so-called "naked" trading.
The admission by Mr Soros that he is entering an already bullish gold market seems to confirm the direction his activities are taking. Official filings at the US Securities and Exchange Commission show that Soros Fund Management, with around $25bn in assets under management, increased its investment in SPDR Gold Trust, the world's largest exchange-traded fund for the precious metal, by 152 per cent in the fourth quarter of last year. Prices have eased a little since then, but a Bloomberg survey of analysts suggests that it has room to go higher.
At the World Economic Forum in Davos in January Mr Soros confirmed his status as gold bug. "When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment," he said. "The ultimate bubble is gold."
Mr Soros became famous as "the man who broke the Bank of England" and made $1bn by betting against the pound during the ERM crisis of 1992.
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