It looks as if George Soros is getting ready to short gold; or rather gold-based equities.

Gold bugs became excited in March, when Soros purchased 1.05 million shares of the SPDR Gold Trust exchange-traded fund (NYSE: GLD); and $264 million worth of the ailing Canadian miner Barrick Gold Corp (NYSE: ABX). Naturally, the gold bulls view Soros’ latest action as proof of the intrinsic value of their favorite metal.

Actually Soros’ interest in gold disproves their thesis. Soros is a speculator who specializes in shorts; he became a legend for shorting the British pound. The most likely explanation for George’s renewed interest in gold; is that he’s spotted another class of equities he can short.

Soros Did Not Actually Buy Gold

The evidence to prove this thesis is right before our eyes; if we want to look. Soros did not actually buy gold – he bought gold-based or gold-related equities.

The SPDR Gold Trust; or SPDR Gold Shares, is an exchange-traded fund that owns options on gold held in vaults around London. Barrick is simply a mining company that specializes in digging up gold.

Neither of those equities is an investment in actual physical gold. Instead they are simply shares; that Soros can sell any time he wants at the press of a button.

Soros thinks those equities are about to increase in value because of increased volatility in the currency and stock markets. Those equities were also quite cheap; Barrick was trading at $16.62 a share on May 27. That means Soros can make a lot of money if those shares increase by just a few dollars.

There is also the possibility that the gold equities could take a sudden drop, which means he can short them. Either way, George will make money, but he’s planning to make the money off the trade – not the gold itself.

The volatility Soros is betting on is the hard landing; he expects for the Yuan and the Chinese economy in general. Soros may also think that a downturn in the United States and further economic chaos in Europe is possible. Soros thinks that these economic crises will convince many more people to buy gold, or gold-related equities.

Gold is a Notional Investment

What Soros is counting on is the idea that gold is a notional investment. A notional investment is a physical object with some intrinsic value; that people believe to be immune from market forces. Classic examples of notional investments include; precious metals, gems, land and certain classes of collectibles such as coins, art and even baseball cards.

Soros’ interest in gold disproves this idea by reminding us that gold is actually a commodity that is affected by market forces. Unlike the gold bugs, Soros knows that gold is very vulnerable to market forces. More importantly he understands that gold investors do not realize that they are buying into a highly volatile market.

Why Gold is not as scarce as You Think

The gold market is extremely volatile, because there is far more of the metal around than most people think.

Households in just one nation; India, could own up to 20,000 tons of gold, The Economic Times estimated last year. Some people estimates of the amount of private gold in India are even higher. V. P. Nandakumar; the executive chairman of a loan company called Manappuram Finance, estimated that there was 22,000 tons of gold worth $1 trillion in private hands in India.

Governments also hold vast amounts of gold. Statista reported that the United States had 8,133.5 tons of gold in its vaults, and the Federal Republic of Germany was storing 3,381 tons.

The danger is that large amounts of gold are held by some nations that are in very sorry economic shape. Two of the biggest hoarders include: Italy; which facing a debt crisis over $397.79 billion in bad loans, is storing 2,451.8 tons of gold and Russia has 1,460.4 tons of gold in its vaults.

There’s also France; with 2,435.7 tons of gold, China with 1,797.5 tons, Saudi Arabia with 322.9 tons, Spain with 281.6 tons and Portugal with 382.5 tons. Saudi Arabia’s government is having trouble paying its bills because of low oil prices. Portugal, Spain and Russia are economic basket cases.

The danger here is obvious what happens if one of these governments; or private individuals, in India start selling gold to pay the bills. Such a fire sale is already going on in Venezuela; the bankrupt Maduro regime is selling gold to pay off its debts. On February 25, CNN reported that Venezuela shipped $1.3 billion worth of gold bars to Switzerland to partially cover $2.3 billion in debt. CNN estimated that Venezuela sold $3.6 billion worth of gold in 2015.

What happens to the price of gold; and gold-related equities, if Russia or Saudi Arabia dumps all of its gold on the market to pay the bills? A similar glut could occur if there is a major economic downturn in India, forcing average to sell gold to raise cash.

Such a sell off would be very profitable for short sellers like Soros, but not for gold bugs. This could be another part of Soros’ bet; he understands that gold is inherently volatile while the bulls do not.

Perhaps Soros purchase should show tell investors to stay away from the gold market, far away. It could be too volatile to be a safe investment right now.