Saturday, August 16, 2014

Paulson holds onto gold ETF, Soros adds gold miners in quarter

For what it's worth, John Paulson (no relation to Hank Paulson) made $20 billion by shorting the subprime mortgage market prior to the collapse of that industry in 2007 - 2009.  He has since turned bullish on gold.  I blogged about him in 2009:  John Paulson.

George Soros' integrity has been questioned often, but his track record of making money is nonpareil.  Note that he prefers mining shares instead of the GLD ETF (we don't know if his family net worth includes physical gold, but I'd be willing to speculate he does possess physical gold since he is a Holocaust survivor).  Shares of mining companies are more volatile than the underlying price of gold, and their share prices tend to be leading indicators.  In other words, fluctuations in the price of gold lag the mining shares--typically by a few months.

For example, if shares of mining companies bottomed out in October, 2013, the price of gold could have bottomed out in December, 2013.  On the other hand, if shares of mining companies peaked in August, 2011, the price of gold might have peaked in September, 2011.

The two most popular mining shares ETF's to track are the GDX (Gold Miners) and the even more volatile GDXJ (Junior Gold Miners).  Gold is already volatile, and the gold miners are even more volatile.  Hence, novice investors are better off avoiding them altogether, especially given the indices and COMEX futures are manipulated by the big institutions (in this case, the bullion banks acting as agents of central banks in their surreptitious price suppression schemes).

The gold manipulators whipsaw the little traders out of their positions by triggering stop-losses.  If you don't know what a whipsaw or a stop-loss is, that's all the more reason you should NOT be investing in mining equities or futures contracts.  In layman's terms, investors in mining equities and futures contracts are not really investors at all.  They are gamblers in a casino where the house wins 90% of the time.  You're literally better off going to the blackjack tables in Vegas where the house edge is 0.5% if you aren't counting cards.  49.75% is WAY better than 10%.  Plus, you'll have more fun in Vegas.

Even if investors decide to trade the miners, the basic foundation of any portfolio should include physical gold and silver.  Avoid trading paper gold.  Accumulate physical gold.

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