Tuesday 27 September 2016

George Soros buys more gold, says Brexit would spell end of EU

Szu Ping Chan

Published 09/06/2016 | 14:13

They’ll be meeting a couple of weeks after billionaire George Soros (pictured), a Davos stalwart, warned that the China-induced turmoil in financial markets is starting to remind him of “the crisis we had in 2008”. Photo: Reuters
They’ll be meeting a couple of weeks after billionaire George Soros (pictured), a Davos stalwart, warned that the China-induced turmoil in financial markets is starting to remind him of “the crisis we had in 2008”. Photo: Reuters

George Soros has piled more of his £30bn fund into gold amid growing concerns about the global economy.

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The billionaire investor also warned that if Britain voted to leave the EU on June 23 it would mark the end of the European project.

Mr Soros, dubbed "the man who broke the Bank of England" for his multi-billion bet against sterling in the 1990s, is reportedly selling more shares and betting "big" on bearish investments, including the precious metal.

UK benchmark borrowing costs fell to a record low on Thursday as jitters over global growth saw investors plough more money into low-risk sovereign debt.

Read more: Post-Brexit Britain: This is what it will look like in 2025 if it leaves EU

The yield on 10-year gilts fell to 1.22pc in early trading, the lowest since records began in 1989.

German 10-year bund yields also dropped to a fresh low of 0.033pc.

"This move is all about the global environment. Advanced economy sovereign bond yields are falling everywhere," said John Wraith, head of UK rates strategy at UBS.

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Mr Soros said he had stepped up purchases of gold because he believed that continued weakness in China would keep global inflation rates around the world dangerously low.

"China continues to suffer from capital flight and has been depleting its foreign currency reserves while other Asian countries have been accumulating foreign currency," Mr Soros said in an email to the Wall Street Journal.

"China is facing internal conflict within its political leadership, and over the coming year this will complicate its ability to deal with financial issues."

Investors buy gold during times of panic because it is seen as a store of value and is widely viewed as an inflation hedge.

Regulatory filings show that in the first quarter of 2016, Mr Soros's fund bought just over a million shares in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, valued at about $123.5m.

Mr Soros's fund also bought 19m shares in Barrick Gold, the world’s largest gold producer, according to filings with the Securities and Exchange Commission.

Mr Soros, who has previously warned that the EU is "on the verge of collapse" because of its handling of the Greek and refugee crisis, said the prospect of a British exit from the bloc posed a fresh threat.

"If Britain leaves, it could unleash a general exodus, and the disintegration of the European Union will become practically unavoidable," he said.

"I’m confident that as we get closer to the Brexit vote, the ‘remain’ camp is getting stronger. Markets are not always right, but in this case I agree with them."

Mr Wraith said uncertainty surrounding the outcome of the EU referendum was also causing concern about the UK economy "above and beyond" the global factors.

"The UK's been slowing. It's had a pretty soft first quarter, it looks like the second quarter will be softer still. And it's supportive for government bonds because people want to get out of risky assets at these times," he said.

It came as Mario Draghi, the president of the European Central Bank, warned that time was running out for governments to implement vital reforms to make economies more competitive in an era of demographic change.

He said it was vital that policymakers did more to reduce long-term unemployment, and that structural reforms could boost growth by lowering jobless rates across Europe.

"There are many understandable political reasons to delay structural reform, but there are few good economic ones. The cost of delay is simply too high."

In a thinly-veiled criticism of eurozone governments, he said very little progress had been made since the Five Presidents' report was published last summer on how to deepen economic union in the eurozone.

"What is now crucial is that we move towards a 'common consensus' on 'what the necessary reforms are', how countries should implement them, and then, that the process starts," he said.

Telegraph.co.uk

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