For those of you who have not heard of investor and hedge fund manager John Paulson, he is a man that forecast the sub-prime mortgage crises and made large, bearish bets on the housing market. Paulson was right. The U.S. housing market went into a tail spin as property values collapsed and mortgage defaults became rampant. The haul on the trade was so large that Mr. Paulson is believed to have made a cool three or four billion for himself-which is believed to be the biggest one year payday in Wall Street history.
Now, John Paulson is bullish on gold prices-and bullish in a big way. Paulson, through his Paulson and Company hedge fund, has placed an enormous bet on bullion. The fund began investing in gold prices back in 2009 as central banks ramped up the printing presses in order to try and promote economic growth. Although the gold market peaked in 2011 and has been somewhat range bound since that time, Paulson’s fund still holds a sizable stake in the gold exchange trade fund GLD after scaling down its position size last year. According to Reuters, as of march 31st the fund owns 10.2 million shares worth about $1.27 billion.
Here are some reasons for his bullishness and some other information points about his bet:
- Fed money printing-Mr. Paulson has stated that “The consequences of printing money over time will be inflation. It’s just difficult to predict when.”
- Mr. Paulson believes that if the economy gains traction and inflation indicators start to uptick, that gold may stand to benefit as investment demand rises.
- Clearly inflation is an important topic, and one that Paulson believes will become an issue at some point. He further stated “If you’re looking for a hedge against potential inflation in the future and have a longer-term view, gold is an important part of anyone’s portfolio.”
- Due to his beliefs, Paulson has allegedly told clients that gold is his best long-term bet.
- Paulson is so bullish on gold prices that he used the ETF to start share classes for his funds that are denominated in bullion. This gave fund investors a way to decouple their holdings from the value of the dollar.
- Paulson invested a significant amount of his own money in his gold fund. Clearly this man believes in his convictions and is willing to back them up.
Could John Paulson be wrong in his bet? Absolutely. Given his track record, however, one needs to consider his opinion on the matter.
It is also difficult to make a case of why gold wouldn’t go higher given current monetary policy and geopolitical issues.
In the case of Mr. Paulson, the threat of inflation appears to be his biggest concern. One cannot argue that inflation could have the potential to accelerate in the coming months and years as the economy picks up steam. Paulson does admit, however, that he doesn’t know when inflation may pick up. This is why owning physical gold or silver can potentially play an important role in one’s portfolio or IRA account. When you buy precious metals, you own the gold or silver! Not a piece of paper, not a promise for your money back-but a real, hard asset that you can touch and feel. Should inflationary pressures begin to pick up, you already own the metals. These metals can remain in your physical possession or in secure storage. The point is this-they will be there for you if and when you need them!
Mr. Paulson is not the only money manager that is bullish on gold prices. Different managers may also have different reasons for their bullish outlooks. These can range from inflation fears, geopolitical risks, economic instability or other issues. Whatever the case may be, we feel that physical gold or silver ownership can potentially help insulate one from inflation as well as geopolitical risks and other economic difficulties.
If you are not currently diversified with physical gold or silver, don’t you think now would be a good time to consider an allocation? If so, please contact an Advantage Gold specialist today at 800-341-5458. Our team will be happy to answer any questions you may have while showing you just how easy it is to add precious metals to your portfolio or IRA account today!