Gold and silver are higher today while sterling is stronger and the Japanese yen has again come under pressure. The yen has weakened on deepening concerns about the Japanese economy and the BOJ Governor said that the Japanese economy is in a very severe state.

Gold is trading at $1,491/oz, £919/oz, €1,055/oz and 121,850 yen per ounce.

Cross Currency Rates

Sterling is firmer today despite UK inflation accelerating again more than economist forecast in April with consumer prices rising 4.5%. Inflation remains a real threat to developed and emerging markets which will lead to continued buying of gold and silver.

Gold's correction has been slow and gradual (unlike silver) and it is down 4.5% in US dollar terms so far in May. However in euro terms gold is flat on the month with gold consolidating in euro terms and looking like it may soon challenge the record high of €1,072/oz.

This is especially the case as the risk posed by Eurozone debt markets is not going away anytime soon and indeed contagion remains a real risk.

Euro Gold - 1 Year (Daily)

The confirmation of George Soros ETF gold sale has again garnered much media comment. Soros' $28 billion fund decreased its holdings of the SPDR Gold Trust, the exchange traded fund.

Soros had bought gold to protect against possible deflation, though his fund now believes there is a reduced chance of such a condition, the Wall Street Journal recently said, citing people close to the matter.

Should Soros and his fund think that inflation is now a greater risk than deflation then it is curious that they would sell all their ETF holdings. It is also curious as Soros is on record regarding having serious concerns regarding the outlook for the euro and the dollar and the dollar as reserve currency of the world.

There is of course the precedent of other hedge fund managers , such as David Einhorn, who have also sold their gold ETF holdings but bought physical bullion in allocated accounts due to a concern about counter party and systemic risk.

It is quite possible that Soros' fund has adopted a similar strategy.

This would allow Soros to discreetly accumulate bullion away from the public and media spotlight that result from SEC filings.

Paulson & Co., the $36 billion hedge fund founded by John Paulson kept its largest holding - $4.41 billion in the SPDR Gold Trust. Paulson's belief in gold is seen in the fact that those who buy his fund can have their stakes denominated in gold rather than in dollars, meaning the value of their investment rises and falls with the price of bullion - lessening exposure to the dollar.

Paulson, unlike Soros, is on record as having purchased gold to protect against inflation.

PIMCO, the largest bond fund in the world, are also increasingly allocating funds to gold in their global equities portfolio. The largest position in [our] fund is gold, which we think is a very good form of protection against what can go wrong, said Anne Gudefin, PIMCO's global equities portfolio manager, told Fortune magazine May 12.

The Soros sale may lead to selling at the margin today by guru driven sellers reading simplistic articles.

However, Soros ETF sale is of far less importance than the much less reported upon and analysed investment demand, pension demand and central bank demand from Asia and internationally.

This demand is coming from a very low base and is sustainable. It is prudent diversification, store of value, safe haven buying and not the rampant speculation involving over allocation and leverage one would associate with a bubble.