My Response, commenting on the article above:
It can be an interesting article. However, it is my opinion that many people on the blogs and the world run around with some wacky market beliefs and distorted views. I know because I used to be one of them! So I kind of realize how they think and where they can potentially go wrong in making the connection, etc.
Soros does use a bit of Technical Analysis. Even his first book, The Alchemy of Finance, does have a bit of TA in it, even though it doesn’t have any charts marked up with trendlines or fibs, etc. When I read it, I interpreted it through the lens of information flow, scenarios, macro, etc. But everyone gets something different from it. Stanley Druckenmiller said in More Money Than God about Alchemy:
Soros broke with the nostrums of fundamental analysis and was ready to buy and sell on technical signals.
Then again, I think Soros uses more information flow as is evidenced by this quote from the book Soros: The Life and Times of a Messianic Billionaire:
He consumes all this information, digests it all, and from there he can come out with his opinion as to how this is all going to be sorted out. What the impact will be on the dollar or other currencies, the interest rate markets. He’ll look at charts, but most of the information he’s processing is verbal, not statistical.
He doesn’t run all the positions in his hedge fund. He is kind of retired now. I am sure he keeps on eye on things and chats with his Chief Investment Officer and employees from time to time and may even run a small amount of capital for his own enjoyment of say a few hundred million, but he is not going to be so picky about what positions go into the portfolio or don’t.
I am sure his hedge fund hires employees of many different talents. So it does not surprise me that he may have hired a trader that uses technical analysis. However, the article on forexlive makes it sound like he hired away one of the finest minds in the world in technical analysis, and that he is going to be making a killing for him and is staying mum about it. Whether he makes a killing or not, the employees are going to probably stay quiet either way. They probably have it written into their employment contracts not to reveal such things to the media.
I don’t necessarily know whether he shorted gold or not. Even if he did short gold, I don’t think he was responsible for the crash. Gold isn’t a very liquid market. It can’t handle big positions of a billions of dollars. So, if Soros did short it, then he probably only shorted a few hundred millions of dollars, which would only put his profits in the tens of millions. The only single large hedge fund running monster gold positions that I can recall is John Paulson’s hedge fund he owns a few billion of Gold. But I don’t think he is going to dump his positions. He seems ready to take it with him to the grave if necessary.
Also, I remember in an interview that Soros gave in Early April, he said that while he didn’t expect gold to go up, he also didn’t expect gold to go down. So if he did short it, then I would expect him to “talk his own book.” That being said, he could of changed stances and shorted it or one of his lieutenants shorted it.
Anyways, what I am more concerned about doing is my daily habits, rather than some wild speculation on what Soros may or may not have done or do in the future.
On March 22, I believed the sensitivity shifted to being slightly bullish and was expecting two scenarios to cause it to rise: The belief that the Fed will continue max QE and potentially raise it with weak US econ data, and the scenario that QE from Japan would cause it to rise. Now after March 22, the price started sagging and sensitivity started to shift again to the bearish side. The last chance for gold was when it tripped the the stops below $1555 on the daily charts, and posted a small short covering rally. After the BoJ QE’d on April 4, I was expecting Gold to post a strong MDMM to the bullish side similar to how the USD/JPY rose. However, gold only managed a very, very weak spike up and was NS. So that invalidated my BoJ QE scenario caused Gold to go up. Then my weaker economic data out of the U.S. causing gold to go up scenario was invalidated when the poor retail sales came out on April 12, but gold still collapsed. After my two primary scenarios were invalidated, and the price just kept on dropping and sagging, then gold just collapsed.
As Soros once said:
I work with investment hypotheses. I watch whether the actual course of events corresponds to my expectations. If not, I realize that I am on the wrong track.
My approach works not by making valid predictions but by allowing me to correct false ones.
If more BoJ QE and weaker US econ data can’t cause gold to rise, then I don’t know what will. Some traders could bet on some short covering now that gold has collapsed, or hope that even worse US econ data spurs more FED QE, but with the increase in volatility and taking on the risk of a MDMM to the bearish side or gaps to the bearish side, I don’t think it is worth it.