Soros Clarifies Position on Gold

In an interview with Reuters, George Soros expanded on previous comments about gold and maybe shed some light on why he says one thing but does another.

"I called gold the 'ultimate bubble' which means that it may be going higher, but it is certainly not safe, and it is not going to last forever," said Soros when interviewed on Wednesday at a Thomson Reuters Newsmaker event.

While Soros has not offered much confidence regarding the long-term direction of gold, he has increased his holdings. In a report in Mineweb, the Soros Fund Management reported owning 5.59 million shares of the SPDR Gold Trust (GLD.P) in the second quarter of 2010. Gold was the funds biggest holding by dollar value.

"This is a period of great uncertainty so nothing is safe. Gold is the only actual bull market currently," he said.

The position squares with Soros' concept of reflexivity, his theory about self-reinforcing beliefs and actions.

"Soros' writings focus heavily on the concept of reflexivity, where the biases of individuals enter into market transactions, potentially changing the perception of fundamentals of the economy. Soros argues that such transitions in the perceptions of fundamentals of the economy are typically marked by disequilibrium rather than equilibrium, and that the conventional economic theory of the market (the 'efficient market hypothesis') does not apply in these situations. Soros has popularized the concepts of dynamic disequilibrium, static disequilibrium, and near-equilibrium conditions."