Soros Warns of Gold Bubble

Record gold prices may soon reverse and disappoint the bulls, said George Soros, the billionaire investor and legendary currency speculator.
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NEW YORK (

TheStreet

) -- Record gold prices may soon reverse and disappoint the bulls, said George Soros, the billionaire investor and legendary currency speculator.

"Gold is the ultimate bubble," Soros said at an event in New York sponsored by

Reuters

. "It is certainly not safe."

Soros, while acknowledging that gold is the best-performing asset in his funds, said he expects a repeat of the historical pattern of bull runs in assets like gold ultimately hitting records and then suddenly reversing.

Gold is currently the only bull market, Soros said, adding that it may continue to rise but "it's not going to last forever." He said it will be interesting to see if gold declines in the coming weeks.

Already today,

gold trading appears to be cooling off

after surging to record highs this week.

>>Companion article: China Runs the World, Soros Says

Gold for December delivery was losing $2.70 to $1,269 an ounce at the Comex division of the New York Mercantile Exchange. The gold price Wednesday has traded as high as $1,273.40 and as low as $1,266.80. On Tuesday, gold hit a record intra-day high of $1,276.50 an ounce, $10 higher than its previous high set in June.

The popular gold exchange-traded fund,

SPDR Gold Shares

(GLD) - Get Report

, is up 6 cents today at $124.04, trading near its 52-week high of $125.

While typically used as a safe haven to store wealth, gold is not the current choice of the Chinese, who are hoarding oil instead, Soros said. Demand for oil from China is at odds with oil producers who may prefer to keep oil in the ground at this point, so the current economic climate also is putting pressure on oil prices as well, Soros said.

The market-leading

US Oil Fund

(USO) - Get Report

is down 1.1% today at $33.51, near the bottom of its 52-week range between $31 and $42.

Soros summed up his overall assessment of the U.S. economy in one word: "blah" and said he's concerned about the misguided "fiscal rectitude" emerging in the U.S. and Europe. It is too soon to be winding down stimulus efforts and imposing government austerity programs, he said.

>>View George Soros' Portfolio

The U.S. and European economies will slow down and stagnate without additional stimulus at this point, Soros warned. That could cause a double-dip recession in the U.S., though Soros said he isn't sure that would happen.

Deflationary pressures in the U.S. and globally are the result of the shifting political tide that would prematurely seek to cut deficits and government debt, Soros said, adding that there is no longer pressure from the financial markets.

While Soros isn't opposed to fiscal discipline, he said it is coming too soon because demand has not yet returned. "It's the right policy at the wrong time," he said.

As a result of these pressures, Soros said there are no investments he can recommend that provide any safety.

"This is a period of great uncertainty so nothing is very safe", he said.

--Written by Glenn Hall in New York.

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