Tag - Spdr Gold Trust Etf

Somebody knows what do about the U.S. dollar rally we've seen lately.

A recent regulatory filing with the SEC on February 16 shows that George Soros' Soros Fund Management has doubled its holdings in the SPDR Gold Trust (NYSE:GLD). Soros is now the 4th biggest investor in GLD. John Paulson's hedge fund, Paulson & Co. owns the most GLD, with 31.5 million shares.

I discussed Soros gold investment in a recent Daily Profit. Soros believes gold is likely to become a "bubble asset." Low interest rates and concerns about the global economic recovery would be the driving catalysts. But as we know, bubbles occur when buying begets buying.

Gold is currently trading around $1,095 an ounce. Price estimates from Goldman Sachs and HSBC call for gold prices to rise to the $1,235 to $1,300 range. But I think Soros' position suggests he thinks it could rise even higher than that.

And that's the thing about bubbles. Once they start, it's hard to say how high prices can run.

Now, as you know, I'm usually a fundamental investor. I like to buy reasonably valued companies that are taking advantage of important economic or consumer related trends. At the same time, I believe gold should be part of any portfolio, especially now.

As you can see from this U.S. Dollar Index chart, the dollar has put in an impressive rally. Much of the reason for this has to do with weakness in the euro due to debt problems with Greece. (We can include potential problems with Spain, Ireland and Portugal as well.)

At some point in the not too distant future, the U.S. dollar will weaken. And that's going to send gold, and other commodities higher. Potentially much higher. Gold alone could easily move 20% higher. And that will mean significant price movement for gold mining stocks.

Last week, we saw blowout earnings from Newmont Mining (NYSE:NEM). The company reported $1.14 in per share earnings, when analysts were expecting $0.79 a share. It's clear that analysts are underestimating how much money gold miners are making with gold at its current price. When gold prices move higher, earnings for gold mining companies are going to go through the roof.

I've uncovered a gold mining stock that trades for $3.35 a share that could be one of the cheapest gold mining stocks on the planet. At $3.35 a share, the company's gold is being valued at approximately $250 an ounce. That's quite a discount!

Earnings are expected to be $0.12 a share for fiscal 2010. That gives this company a P/E of 14. But here's the thing – given the current price of gold, and the potential for a significant move higher for gold prices, the earnings estimates for this gold mining stock are ridiculously low.

That $0.12 a share estimate is more likely to be around $0.20 a share. That suggests the stock should move 66% just to be fairly valued. And if a bubble for gold prices starts like Soros and others expect, this stock will do even better. For more on this undervalued gold stock, click HERE.

The next catalyst for the U.S. dollar could come any day. Already, stocks are moving higher in anticipation of a bailout package for Greece. A bailout could come at any time. And that will send the euro higher and the U.S. dollar lower.

I expect gold prices to move quickly once the U.S. dollar starts selling off. Now is the time to add exposure to gold.

You've heard me call out big-name investors who are "talking their book" in the past. An investors is "talking his or her book" when he/she states an opinion as fact for the sole purpose of helping a particular trade.

We've seen Warren Buffett do this. Last year, it was widely known that he was massively short the U.S. dollar. And he continued to say he thought the dollar was collapsing, even as it hit important support. Then we learned later that Buffett was covering his dollar short, all the while extolling its weakness.

Obviously, Buffett, in true P.T. Barnum fashion, was attempting to use his influence to talk the dollar down while he covered. He only needed to fool people for a short time as he exited the trade.

Last month at the Davos conference in Switzerland, George Soros did his version of talking his book. He made headlines when he said "The ultimate asset bubble is gold."

I always view statements like these with skepticism. And sure, recent SEC filings reveal that at the same time Soros was saying gold was a bubble, his Soros Fund Management was buying 6.2 million shares of the SPDR Gold Trust ETF (NYSE: GLD) for $663 million.

Looking at this 6 month chart of GLD, it's a reasonable guess that Soros was buying between $105 and $110 in December (you may need to zoom in on the chart in order to see all the information). Gold is on the verge of breaking above that range now.

It would be easy to think that Soros was simply pulling a fast one on unsuspecting investors. But this is a case where it pays to know a little more about the man and his methods. Here is a Soros quote from the early '90s:

"Economic history is a never-ending series of episodes based on falsehoods and lies, not truths. It represents the path to big money. The object is to recognize the trend whose premise is false, ride that trend, and step off before it is discredited."

I love that quote, even though it's a bit cynical and perhaps depressing. But what he is saying should be a revelation to any investor, because it requires the investor to maintain a sense of skepticism.

I also want to emphasize that companies do make money, they grow, and their stock prices will reflect this. In other words, there are fundamental reasons for stocks to move. But Soros is talking about making the big money.

As late as 2007, Soros was calling the housing boom a bubble. I also think we can assume he made a lot of money during the housing bubble in the sectors that were supporting the housing bubble, like commodities. And there's no doubt he was well-positioned when the bubble burst.

The Cheapest Gold Stock?

So what do we do with the information that he's now buying gold explicitly because gold is bubble fodder? We assume that he sees the potential for a big move in gold. Gold moves for two reasons: a weak U.S. dollar and inflation fears.

Given the Fed's desire to keep interest rates low, we can imagine that inflation could become an issue. And U.S. dollar weakness is also not outside the realm of possibility.

Soros isn't the only one moving into gold. Hedge fund manager Henry Paulson and even China have been buying gold. It may be a good time to take a position.

SmallCapInvestor PRO members are holding a $3.50 gold mining stock that's so cheap it's like buying gold at $120 an ounce. For more on this stock, click HERE.

20% in Two Days

On Tuesday morning, TradeMaster Daily Stock Alerts' Jason Cimpl told his readers to buy Netlist (Nasdaq: NLST) at $3.58 share. They sold it yesterday at $4.29 for a sweet 20% gain in less than 2 days.

For today, Jason is looking for two things from the stock market:

First, I want to see late day buying. This means that pull-backs are being bought and prices are likely to move higher.

Second (and more important) selling volume has to be low. Heavy volume selling is not a strong signal that the market is preparing to make higher highs, the opposite is then true for selling with low volume. If we do not get a pull-back today, then I'm looking for technology to show leadership on increasing volume - this will show me that this week's rally has legs.

And I'm sure that will mean more trading gains for his readers.