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Gold possesses the rare distinction of being both next to useless and highly valuable.Getty Images/iStockphoto

George Soros, the billionaire investor, has a new affection for gold, according to documents filed this week – and he's not the only U.S. hedge fund legend who sees the metal's attraction.

Stanley Druckenmiller, the fabulously successful founder of Duquesne Family Office LLC, urged his audience at the Sohn Investment Conference earlier this month to get out of the stock market before the debacle he sees ahead. He said gold "remains our largest currency allocation."

David Einhorn, the much-followed chief of Greenlight Capital, has also bet heavily on the precious metal, in his case through a substantial stake in an exchange-traded fund (ETF) that tracks gold miners.

The question is whether these stars of Wall Street are leading a broad, long-lasting surge of generalist investors into gold or are merely hoping to capitalize on market momentum that could quickly reverse itself. To just about everyone's surprise, gold has already climbed about 20 per cent this year and many gold mining stocks have more than doubled.

For now, the hedgies' affection for precious metals appears to be the direct reflection of their skepticism about the stock market. Growth in U.S. corporate earnings has been meagre to negative in recent quarters and, after a long bull market, few stocks look cheap.

Mr. Soros made his fortune with bold moves – such as a spectacular bet against the British pound back in 1992 that is supposed to have netted him $1-billion (U.S.). Today he seems certain that stocks are due for a tumble.

In filings made public Monday, his Soros Fund Management disclosed a 2.1-million-share "put" option on the SPDR S&P 500 ETF, which tracks the widely followed index of U.S. stocks.

Put options give their holder the right to sell shares at a specific price by a certain date. People who believe a stock is poised to fall often purchase "puts" on it as a way to benefit from the security's decline.

Mr. Soros has made this bearish bet before: A quarter ago, he reported owning a one-million-share put option on the S&P 500. However, his latest filing on Monday shows he more than doubled his bet in the following months. That suggests a growing conviction on his part that stocks – at least, big U.S. ones – are vulnerable to a nasty correction.

In keeping with that theme, his new bets on precious metals appear to be an attempt to find investments that could prosper from economic turmoil. Most notable is his $263.7-million stake in Barrick Gold Corp., the Toronto miner. Also noteworthy is a $16.6-million investment in Silver Wheaton Corp. of Vancouver, which buys rights to future streams of production from silver and gold miners.

In addition, Mr. Soros has built up "call" options on the SPDR Gold Trust, an ETF tracking bullion, that allow him to buy shares at a set price. They're a way to bet that gold will rise in price.

However, anyone who wants to follow in his footsteps has to confront the fact that gold looks just as vulnerable to a correction as stocks.

The metal jumped this year because U.S. interest rates didn't. Gold, which pays zero yield, is at its most attractive when competing investments also offer next to no payout. But when rates on bonds and bank accounts go up, gold prices head in the opposite direction.

If the U.S. economy were to pick up just a bit of speed, and the U.S. Federal Reserve were to raise rates a couple of times before year-end, gold's recent rise might quickly reverse itself.

Keep in mind, too, that the snapshot of Soros Fund Management's portfolio that was revealed in securities filings on Monday is a look back in time. The filings, required of large U.S. institutional investors, come out 45 days after the end of each quarter and there's no guarantee that Mr. Soros still owns any of the securities listed in the form, given his habit of bolting in and out of investments.

Some well-known hedge fund managers are already beginning to take profits. John Paulson, a noted gold bull, reported this week that his Paulson & Co. fund had cut its stake in AngloGold Ashanti and in the SPDR Gold Trust.