Is Soros Really Holding a Notional Value of 10 Billion in GLD?

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SAN FRANCISCO (MarketWatch) — Soros Fund Management LLC, headed by George Soros, increased gold positions during the third quarter, according to a regulatory filing late Monday. Soros held 4,697,008 shares of the SPDR Gold Trust(GLD 132.51, +0.09, +0.07%) and 705,000 call options on the gold ETF at the end of September, the filing showed. Soros also owned 5,000,000 shares of the iShares Gold Trust (IAU 13.28, +0.03, +0.23%) at the end of the third quarter, according to the filing. Three months earlier, Soros held 5,244,697 shares of the SPDR Gold Trust, a portion of which was a shared position. The firm held no shares of the iShares Gold Trust at the end of June, according to the filing. Such regulatory filings don’t include all positions held by investment firms. Many derivatives, direct commodity holdings and short positions aren’t included.

So lets do some math here.

The shares in the GLD would be worth around 625 million. The shares in the IAU would be worth 66 million. Put the two together you get around 700 million dollars of value.  As of June 2009 his fund was worth 4.2 bullion. Lets say for fun his fund is worth 5.5 billion.  John Paulson on the other hand owns 31.5 million shares equalling about 4 billion dollars. Now here is the rub, owning 705, 000 call options means he is holding a notional value of around 9.3 billion dollars of GLD options. Add that to the original sum of 700 million and John Paulson and you have 14 billion dollars of GLD.

But let’s say that you do believe in Gold, the fact that Sorros has about 19% in a single position is pure lunacy. The GLD fund is only worth 48 billion dollars. Over a quarter of the value of the fund is being held by two people. I am cracking up laughing here because this in my opinion is an example of trapped elephants who might have great paper gains. But for them to realize their gains they will need to convert the GLD into money and that will definitely move the market. Of course you will say but wait how will the options move the market? It is because the options are hedged with something and I am guessing gold, or GLD, or something. And once those trades are unwound or wound they will move the market.

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