I can't say better than Elitist Trader who posted a few minutes faster than me: ... and yes, it would be $850 mln position (in gold spread, not in gold).
BUT the statement says this quote - Thanks to the nature of futures trading, Daniel Shak's $10 million hedge fund held gold contracts valued at more than $850 million, more than 10% of the main U.S. futures market, and the equivalent of South Africa's annual gold production.- End quote He is saying the net value of the position was same as South Africa's annual Gold Production - That means Physical Gold Value not Spread Position Value. If you held Short Feb Gold 3 contracts and Long April Gold 3 contracts and based on $1316/ounce would you say you are holding $789 600 worth of Gold?
they are counting the absolute value of each contract- i agree with you it is a terrible mistake, but then again who expects anything smart of journalists or politicians?
It is the notional value that grabs headlines which the shorts didn't seem to mind when it was applied to the housing market, such as "By the end of 2007, the CDS market had a notional value of $62.2 trillion.". Often, they just leave out the "notional" qualification because the public doesn't understand what it means anyway.
Don't make fun of an old man. I DID get in at $35 with some pre-'30's $20 gold pieces. But I went belly-up in the '80's and had to sell it all just to eat.
In fact, through the spreads, he wasn't long or short gold, but was long or short his perceived mispricing of carry/lease/interest rates between the months.
This sounds to me like an example of the old "how do you make a small fortune?" joke. I have trouble believing that somebody who could turn $10mm into $3mm with one massive trade could have made that $10mm himself.
How did he make his money? Obviously not in Poker or in the markets--- $10 mill wont even pay lunch money in a hedge fund. 7.5 mil apt? obviously, this money came from somewhere other than the markets.