Soros, Goldsmith Likely to Hold On to Gold Positions : Investing: Renowned traders’ commitments, along with strong demand in the Far East and tightening supply, add credibility to hope for a sustained rally.

Wall Street investor George Soros and Anglo-French financier Sir James Goldsmith, the big-name traders who sparked gold prices to 28-month highs recently, are long-term investors in the metal who are not just interested in a quick buck.

Similarly, wealthy U. S. investment funds, whose decisions carry a lot of clout, also see gold as a long-term item in their portfolios.

So say the experts at a Financial Times Gold Conference here.

They reckon that the bull market in gold is not over, even though the metal traded Monday at $364 an ounce, down from last month’s high of $384.50.

The rally started in mid-March, when gold slumped to a 10-year low of $326 an ounce.

“I would be happy seeing prices in the $360s,” said David Pryde, head of commodity trading at New York-based J. P. Morgan. That would attract more liquidity to the market, which had risen too fast and was now correcting itself, he said.

Gold prices began to climb in March on fears that economic policies in major countries would rekindle inflation while political unrest in key producing countries such as South Africa and Russia also spurred buying.

Then news broke that Hungarian-born Soros had bought a 13.5% stake in North American gold producer Newmont Mining from Goldsmith, who in turn invested the proceeds in gold options.

“Soros is not in gold for the short term. If he was he would not have bought 13.5% of Newmont,” said Frank Veneroso of Omega Advisors. “That is now a registered stock which he has to hold for six months. If he wanted a short-term investment he would have bought 9%.”

Pryde notes that while some of the investment funds had taken profits from the market’s advance, they still retained a “core” investment to be held for the long term.

“The fund managers are very clever. They look at the fundamentals of all commodities, looking for deficits,” he said, citing recent fund buying in the lumber futures market, which was suffering from short supply while the U. S. housing market--a key end-user--was about to recover.

The lumber market boomed and the funds took their profits, but lumber prices are still higher than they were before, Pryde noted.

Veneroso emphasized two factors behind the investment funds’ view of gold.

“Mine supply has increased on average by 1.7% per year over the past two decades,” he said. “Meanwhile, the Far East has seen the fastest growth in the economic world averaging 9% per year versus a Western average of about 2%. And the Far East consumes 10 times as much gold per unit of income as anywhere else.”

Gold Fields Mineral Services’ “Gold 1993” survey, an authoritative report, forecasts a supply shortage of more than 600 metric tons this year.

Last year’s deficit was largely balanced by sales from the Dutch and Belgian central banks totaling 600 tons. That is unlikely to happen again in 1993, analysts say.

Separately, the Bank for International Settlements said Monday that official gold reserves held by the industrialized countries fell by 320 tons in 1992, the largest decline since 1979, and the drop is continuing.

“Much of the decrease was the consequence of Belgium’s sales of 202 tons in June,” the Basel, Switzerland-based bank for central banks said in its 1992 annual report.

Total official gold reserves have continued to decline in 1993, mainly as a result of the settlement of forward sales in November of 400 tons by the Dutch central bank.

The bank said that China was a major buyer of gold last year, as strong economic growth, increasing inflationary pressures and a lack of financial assets offering positive returns bolstered demand for the precious metal.