Let’s Not Call John Paulson a Gold Bug – He’s a Hedge Fund Chief Who Invests Like a Gold Bug

Buying gold doesn’t make a whole lot of financial sense in Warren Buffet's estimation, and he even did the math to prove it, see the story here. But some people just aren’t getting Uncle Warren's message, and chief among them is hedge fund billionaire John Paulson. Investments tied to gold are now 44% of his $21 billion hedge fund portfolio, Bloomberg reports. That’s up from 33% at the end of the first quarter. He bought 4.53 million shares of SPDR Gold Trust (GLD) and more shares of NovaGold Resources (NG).

Paulson, of course, made his first few billion by betting on a housing market collapse. And once you’re a billionaire trader, you must be really smart, right? After all, he had 46% of his portfolio in gold in March 2009, when the stock market hit the ground. And he’s not the only billionaire buying gold. George Soros is doing it, too.

According to Bloomberg, Paulson told clients this year “that gold is his best long-term best, serving as protection against currency debasement, rising inflation and a possible breakup of the euro.” In other words, gold's a hedge against bad shit happening.

Paulson can be wrong. He lost $3 billion last year, according to Forbes. A little bet on Bank of America (BAC) didn’t help.

Unfortunately for Paulson now, gold prices are not cooperating. Paulson notes that gold miners are cheap (cheaper than gold, anyway). (True, as we said, but there are still reasons not to like them.)

Gold Price in US Dollars Chart

Gold Price in US Dollars data by YCharts

But if the gold price falls a lot, he can always melt down the bars to make a really big crown.

From the editors of YCharts.YCharts Pro Investor Service includes professional stock charts, stock ratings and portfolio strategies.



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