05/21/09 Baltimore, Maryland Could buying gold in 2009 be the investment equivalent of shorting subprime in 2007?
Recently famous fund manager John Paulson has been piling into gold funds. If you recall, Paulson gained celebrity for his early and aggressive shorting of all things subprime and financial, a move which garnered all sorts of accolades… highest-paid fund manager of last year, Barron’s No. 1 fund, etc.
Paulson has now become the largest holder of the SPDR Gold Trust, better known as GLD. His fund owns a whopping 8.7% stake, worth over $2.8 billion. That’s his No. 1 holding, worth over 30% of his entire portfolio.
According to a recently filed 13-K, he’s also picked up super-sized stakes in the Gold Miners ETF (GDX), Gold Fields, Kinross Gold and AngloGold Ashanti.
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I don’t think so. There are commercials hawking gold on Fox News all the time now – not exactly an indication of a great investment opportunity. More likely is that Paulson has some Armageddonite in him and he’s just pressing his luck now.
With the economic situation that currently exist. Unemployment high and going higher, real estate crash, credit card problems increasing, the federal reserve printing money like crazy. It’s a wonder that the price of gold isn’t much higher.
I would be astonished if Paulson’s bet turned out to be wrong though, given the sheer amount of crazyness in the markets and the state of human affairs, my reason tells me not to.