Why Gold Will be the "Greatest Trade Ever"

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Forget about all the forecasts being made for 2010. Here's my prediction for 2015: An entirely new name – John A. Paulson – will grace the coveted top of the annual Forbes billionaires list.

And the gap between Paulson and the runner-up billionaire will be huge.

Everyone knows that Bill Gates and Warren Buffet are America's – and the world's – two richest men. But the financial crisis of 2008 and 2009 was not kind to either of them, eradicating $17 billion of their combined net worth.

On that famed list, at No. 33, is where you'll find Paulson today.  The hedge-fund manager's financial acumen led to what is now being called the "the greatest trade ever." By shorting the subprime mortgage market, Paulson & Co. Inc. generated a $15 billion gain. 

Paulson's personal net worth of $6 billion is impressive in its own right. But over the next several years, I believe that Paulson's trading savvy will vault him into the top spot.

And the vehicle that will take him there is gold.


Going For the Gold

Paulson's latest foray says a lot about how he intends to further multiply his own net worth, as well as that of his clients.

That foray will focus on gold, he said during an address to the Japan Society in New York earlier this month.

"As an investor, I became very concerned about having my assets denominated in U.S. dollars," Paulson told his audience. "So I looked for another currency in which to denominate my assets in. I feel that gold is the best currency." 

As of June 30, gold and gold-related assets accounted for 46% of the Paulson firm's total holdings – a colossal position that flies in the face of traditional portfolio-diversification theory and position sizing.  Yet I expect this will help him generate a brand new "greatest trade ever."

It's also worth noting that Paulson recently announced his firm's plan for a Jan. 1 launch of a dedicated gold fund. The fund will invest in gold stocks and gold derivatives in a way that will enable it to outperform the price of gold. Paulson is committing $250 million of his own capital to this new investment vehicle.
This all adds up to one enormous wager on gold. But Paulson's track record and reputation for research diligence make it impossible to ignore.

The story behind the killing that Paulson's company made on the subprime-mortgage crash – and the lengths that Paulson and star analyst Paolo Pellegrini went to create the profit opportunity – is as gripping as any detective story. 

Although it's now referred to as the "greatest trade" ever, it certainly wasn't the easiest position to take. Paulson and his cohorts watched from the sidelines as the housing industry zoomed through four years of unprecedented growth. When Paulson bet against the bubble, and continued to increase his position even as housing continued its surge, he found that many longstanding customers that had profited nicely from Paulson & Co. refused to go along.

Paulson, they felt, was flat out wrong.

Is that happening again? After all, there's a long list of pundits who are right now saying that gold is in a bubble that could burst at any time. Ignore them. This array of "talking heads" will inflict irreparable damage on your portfolio.

Besides, Paulson isn't alone in his investment thesis.

In a recent interview, author and global-investing guru Jim Rogers said that "during the course of the bull market [gold] is going to go much higher, it is certainly not a bubble yet." To underscore his point, Rogers said that "I don't think this is the top," and said that "I'm not selling under any circumstances."

Also in this camp is Victor "Trader Vic" Sperandeo, whose 40 years of market experience has included stints with George Soros and Leon Cooperman.
"Well, I'm on record across the world as saying that gold is the best investment in the world for the next two to three years," Sperandeo said. "If you go back to its lows, and you compound where [gold] is today, it's about 6.5% compounded. That isn't a bubble."

Where Does Gold Go Next?

More recently, however, gold has experienced an unprecedented run. At one point, for example, it sprinted from $1,050 to $1,218 in under 30 days flat. 

That's an impressive 16% gain.  Between late October and early December, the precious yellow metal saw 14 record closes in 17 days.  So its recent pullback is not only unsurprising, it's healthy.

Don't forget that gold's clocked a positive gain every year since 2001.  Yet gold's run is far from over; rather, it's just getting warmed up…

My research tells me we're currently in what I've labeled as "Stage Two" of the current bull market in gold. Stage Two begins when gold decouples from the dominant currency (something that's clearly already taking place against the U.S. dollar). The yellow metal then rises against most other currencies, as investment demand kicks in. 

As they attempt to forecast gold's next move, market observers often rely on the U.S. dollar as their chief barometer.

That's a futile game.

While the greenback does have an impact on the price of gold, it's more correlated to shorter-term price movements. Comparing the U.S. dollar's exchange rate to other currencies is only mildly helpful.  The reason: Because America is such a big consumer of global goods, other nations will move to devalue their currencies to make sure that their exports remain competitive.

The best barometer, then, is the price of gold versus all "fiat" currencies, since gold is "real" money and those other currencies aren't. A good proxy here is the U.S. Dollar Index, which is composed of euros, Japanese yen, British pounds, Canadian dollars, Swedish kronas, and Swiss francs. 

Gold easily surpassed its previous 2008 high against this basket of currencies.  We are clearly on a path of competitive fiat money devaluation. Only two years ago, one ounce of gold bought just eight units of the U.S. Dollar index.  In early 2008, that ratio had spiked to 14 units. After recently peaking at 16, an ounce of gold still buys 15 units. Look for the upward trajectory to continue – and to do so for the long haul.

There's only one possible conclusion here: Gold's value is rising against all major fiat currencies.

The Growing Global Demand for Gold

Another hallmark of Stage Two in a gold bull market is when sophisticated investors take positions of their own.

Investors in Asia, Europe and many other global investors have a much stronger affinity for gold, and understand its ability to preserve wealth. Experienced and professional investors alike make their portfolio allocations at this point in the cycle, and Paulson's just one of several institutional investors who exemplify this out point of view.

The purchase of 200 tons of International Monetary Fund (IMF) gold by India's central bank in late October helped propel gold to its recent record highs. Given that this was the single largest purchase of gold by a central bank in the past 30 years, its dramatic effect is justified. 

But two aspects of this landmark transaction are especially noteworthy.  First of all, India was comfortable enough with gold at $1,045 to part with $6.5 billion – no small outlay, even for a central bank. And second, India chose gold over unbacked fiat currencies.

Other growing global economies have also been hoarding physical bullion, says the World Gold Council, which forecasts that 2009 will see a new trend asserted: Central banks will become net gold buyers for years to come. 

Also Fueling the Gold Bull…

I've already made a strong case for gold. But those aren't the only catalysts pushing gold higher. In fact, here are a few more:

  • Since its 1980 peak, gold's only up 65%, while inflation is up 175% and stocks have gained 900%: there's plenty of ground to make up.
  • Scores of junior gold explorers and miners still trade below book value; many are still too cheap.
  • Gold production peaked in 2001 and has been falling since that time, meaning that the supply-and-demand dynamic points to much higher prices for gold.
  • Sovereign-debt defaults are a growing risk, against which gold is the best insurance (see Greece, Ireland, Spain and other recent ratings downgrades)
  • There's growing interest in gold. But the masses have yet to join in; when the typical investor and consumer starts to view gold as an essential holding, the price of gold will begin a near-vertical ascent – a near-mania/near-bubble scenario that could cause gold to more than double from current prices.

I said at the beginning of this piece that Paulson was headed for the No. 1 spot on the Forbes billionaires list.

Now you know how he's going to get there.

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About the Author

Peter Krauth is the Resource Specialist for Money Map Press and has contributed some of the most popular and highly regarded investing articles on Money Morning. Peter is headquartered in resource-rich Canada, but he travels around the world to dig up the very best profit opportunity, whether it's in gold, silver, oil, coal, or even potash.

Read full bio

  1. ankit gupta | December 28, 2009

    One word to describe the article- BRILLIANT. I am completely on board with your view about gold. I have also shared some of my view in my blog – http://www.theworldofcommodity.blogspot.com.

  2. Mark Sisson | December 28, 2009

    Great article. Gold is unquestionably one of the best investments of the next decade. With the price considerably higher than what the average cash-strapped U.S. investor can afford, I see those investors running to Junior Miners in production. I am sure they will see the young cousin of gold, silver, and it's much more attractive price, and rush into this more affordable market.

  3. Michael Halpin | December 28, 2009

    To Whom it may Concern: I would like to get a copy of Schiff's book on Gold (spoken of in the "More on this topic" list above). It comes free with the agreement to join Money Map Reports (which I've already done). Since I'm already a member, I presume that his book will cost me. Could some one let me know how much?

    Thanks,

    Mike

    • biff summers | December 28, 2009

      I too am a member and yes I would also like to know why I have to pay and how much I will have to pay .

    • Andrew | December 30, 2009

      Mike,

      You can go online to Amazon (as if you didn't know) and get the general retail price and Amazon's price of Schiff's book. It seems to me that your post was just a poorly disguised promo for that organization you wrote about.

  4. Peter Courtenay Stephens | December 28, 2009

    The gold bugs continually refer to the masses not being aware and buying gold at this point. What is actual reality is that the masses never had much buying power for gold in the 1st place. They are to busy in their day to day survival. What is true is that the large upper middle class will miss the early boat if they have not already and when they jump on the band wagon to cover their butts,then gold will rise to the expected or unexpected highs it is projected to attain.
    I have been a gold and silver bug since 1964, and it is my opinion that now is the beginning for the march to gold supremacy. Silver will also move right along and may very well surpass gold in the long run by a large percentage.

  5. Helga Enneking | December 28, 2009

    Where &how can I invest in Paulsons Gold fund? I am running my SMSF.in Australia

    Helga

  6. sham | December 28, 2009

    hi im new to the site, you are brilliant,
    i have one question, which gold stock would you recomend to buy ?

    • Peter Pomialowski | December 29, 2009

      Cypress Development Corporation CDNX/CYP

      Rubicon Minerals Corp TSX/RMX

      Red Lake, Ontario, Canada gold camp, home to Goldcorp Red Lake Gold Mines, largest gold mine in Canada.

    • Jeff | December 30, 2009

      Great Basin Gold is a early stage producer that will be growing its production over the next 18 months to about 400,000 ounces annually from 2 mines, one in Nevada, very high grade, and another in South Africa,very large deposit, and good grade near surface, easy extraction, Tyhee TDC is a undervalued junior with over 2 million ounces proven and growing, in Canada's Yellowknife mining friendly region, TDC or TYHJF for US investors is currently being valued at 20$ per ounce in the ground, very cheap, an investment firm recently did a extensive writeup on Tyhee and gave it a .44 price target, but that was based on $750 Gold.

    • Bromides | December 30, 2009

      I have been purchasing Rubicon Minerals over the past five years and haven't been disappointed–RBY on NYSE Amex.

  7. Grandpops | December 28, 2009

    I would say physical owned GOLD is a must in ones potfolio (if you can afford it) however some of us can't but we can afford to buy a few shares of "penny" gold/silver stocks.. what i would like to know is which stocks (less than a buck per share) would be excellent/low risk stocks worthy of consideration to invest a small amout of hard earned money in. Also can you go around a broker and simply buy them on line with out having to worry about all the scam rascals out there. I throw this out here in hopes there are others that need a answer to a peplexing situation.

    Regards

    R
    Grandpops

    • nature boy | December 30, 2009

      If all you can afford is penny gold stocks, then just go buy some silver coins.
      Small cap miners are a HIGHLY speculative crapshoot. Even if you do massive due diligence, you are still very vulnerable to unseen forces. Naked shorting in Toronto and Vancouver is pandemic.The market makers on most of those stocks manipulate as basic strategy: NEVER place a market order on such a stock. Many juniors have toxic derivatives inside their financing agreements.
      Grandpops, do you want to play in a rigged casino? Then play Canadian juniors and explorers in Toronto and Vancouver.
      If you REALLY want to preserve your hard-earned money, get to a coin store and buy bullion coins. Bout 18 bucks'll get ya an ounce coin of real money. It doesn't much matter the price – the weight stays the same! :)
      I still pay about 25 cents for a gallon of gas…….How? Those pre-65 silver quarters? They are worth almost 3 bucks a pop …. that's a gallon of gas.

    • Pops | December 30, 2009

      Buy some CGLD, cheap stock with fantastic future.

  8. debora edholm | December 28, 2009

    I agree with everything said. I also like silver a lot. Living here in Costa Rica it really hurts when the dollars value keeps going down. Wish I could be paid in gold or silver……………

    • Robert Olan Blanton | December 30, 2009

      Debora Edholm,

      I am in San Isedro de en Grecia, de Alajuela, Costa Rica. I have gold bullion in the U.S. My email is robertolan@earthlink.net if you would like to talk off record. I have the same problem, and am sure that a lot of Xpats do too.
      Bob

  9. scone | December 28, 2009

    @sham:
    timmins gold

  10. Prof. Simpleton | December 28, 2009

    Q: Who controls the AU Market?
    A: The "ROTchilds" & their Gold-Gang

    Q: Who controls the U.S. Dollar?
    A: The "ROCKafellas" & their Bang-Gang

    >USD goes Up = GOLD goes Down
    <GOLD goes Down = USD goes Up

    Now it come to pass that these 2 GANGS are No Strangers to each other. What if these 2 had actually "gang-up" together and play The GAME.

    Go figure it out!

    – Prof. Simpleton

  11. rolf neumann | December 28, 2009

    thx for article…

    questions:
    1. how/where can one invest in John A. Paulson's Gold bet? your article is great but not practical enough & mere hype – lest it states how to play the recommendations. so does one assume one needs to just buy gold or gold ETFs or ?! if buying iShares or whatever form, where, since many brokerage firms do not trade gold?!

    2. what's best way to play the Silver resource?

    3. it's odd that there's so much talk of Gold going up when one hears often enough, that Silver will surpass Gold, please explain.

    thanks,
    rolf

  12. Lorenzo Montoya | December 28, 2009

    to repeat one of the questions above, how can we invest in Paulson's Gold fund?
    Similarly, what is Mr. Paulson's opinion on silver?

  13. Reid | December 28, 2009

    This article is certainly contrary to one that you just published last week. How about an on line video debate between the two writers?

  14. Car.os Comesaña | December 28, 2009

    What about potential swings in the gold market due to position taking/unloading from the strong gold holders ? (China, etc).

  15. Alan | December 28, 2009

    Execllent list of the critical reasons that gold price is going up in next few yeras, I believe we'll see $1500 price for it very soon.

  16. George | December 28, 2009

    Do you publish two contradicting articles, so at the end you can claim "we told you in advance…" ? Then I need to have two trading accounts, one to go short in gold, and going long on the other account. (I can not go short and long on the same account.) Maybe this is the difference between publishing and investing. You can publish short and long of the same commodity on the same account. Thanks.

  17. Marchand | December 28, 2009

    I have the same questions as grandpops. I can only buy smaller costs stocks in gold. How do I go about this without a stockbroker. My past experience with stockbrokers has not been good.

    Marchand,

  18. john | December 28, 2009

    Australia`s gold miners will be in a good position for this outcome?there is plenty of the stuff down there!!

  19. Mike | December 28, 2009

    There's a contrarian argument to gold's run… One that suggests that sovereign wealth funds, massively leveraged, have pushed gold and oil prices to unsustainable levels. The argument follows that this debt is imploding and, once it is clear that they have no intent, nor ability, to pay the debt back, it will bring down the prices of gold and oil…as well as the world stock markets.

    As we observe sovereign nations nearing default, UAE first, then Greece, Ireland, Spain and Italy…later England etc… Only one debt will remain viable. The US debt will be the single hope for global survival. The great investors of the world are flocking to the US debt window, oversubscribing new debt issues 3 or 4 to each $ offered…

    How will we experience the massive inflation being predicted by some while debt destruction in the real estate and housing markets are so pronounced? How will this inflation happen when banks are unwilling to loan money thus money creation is virtually stagnant. Don't get caught up with M1…See what is happening with M3….(still calculable despite government's reluctance to disseminate).

    Betting against Paulson is a loser's gambit while we remain in this bull market, but I'd consider running for the hills if gold breaks below $980…

  20. walter mitchell | December 29, 2009

    WHY I DO NOT LIKE GOLD. This is really why i hate gold. I live in Costa Rica. We have a Canadian mining company, Infinito Gold, which is an open pit mine. The damage being done is tremendous. The flyway of the Green Parrot is no more. This was a protected space that no longer exists. Besides this the entire San Juan – St. John river system is in peril from the cyanide used to extract the gold from the rock. This area is presently a world record system for snook and tarpon. it will be NO more.

    • David Smith | December 30, 2009

      Ths behavior is not gold's fault. What you describe is NOW unacceptable in most parts of the world. I grew up in WV and saw streams running orange from the outflow of the coal mines.

      The reality is that EVERYTHING we use is either grown or mined. The solution then, IMHO, is that we need to rationally manage and work out cost/benefit analysis…then hold all parties to it!

      Gold has been for 5,000 years, honest money, and will remain so going forward…It will be your financial lifeboat for the evolving troubles – insurance first/profit second.

      Low grade, bulk mining's (heap leaching – cyanide use) day is coming to a close. There are MANY mining companies which operate on an almost environmentally neutral effect on the environment.

      Grasshopper

    • Cindy | January 2, 2010

      Walter,

      Have you read the environmental studies?

      The environment and the people have been taken into account with every step of this project.

      Do you think it is more acceptable that individual miners mine old mines using mercury to their own peril and the peril of others and the environment rather a professional company with a plan that has been approved by the government because it with not hurt the environment?

      The cyanide is in an enclosed system and will not be released into the river or anywhere else.

      To get on the "their destroying our environment" bandwagon without a true understanding of exactly what is going to happen and how it will positively impact the people in the area is irresponsible.

  21. Trade like a Hedge Fund | December 29, 2009

    One main reason is its price. Its increasing day by day. Am I right ?

  22. Sluggo | December 29, 2009

    "i have one question, which gold stock would you recomend to buy ?"

    San Gold – SGR TSX.V
    Lake Shore Gold – LSG TSX
    Rubicon – RMX – TSX
    Focus – FCV – TSX.V

    Thank me later

  23. Murray | December 29, 2009

    If your looking for a gold company to invest in…look at San Gold. It trades up in Canada on the TSX-V (Venture Exchange SGR). Absolutely amazing drill results. There one of the few small/mid teir producers. There geographic position is in Canada as well.

    Anyways. Check it out for your selves.

    Great Article.

  24. Henry Lane | December 30, 2009

    Suckers all. If this clown knew anything about making an honest or dishonest buck would not be wasting his time writing articles or selling news letters.No one is going to knock on your door to make you a rich and that includes the guy who wanted to buy a water or oil lease on your land.

    • JD | December 30, 2009

      "Suckers all", probably been saying that for the last 10 years…keep saying that and eventually you'll be right!

  25. Rocky | December 30, 2009

    Newcrest (NCM) listed on the Australian Stock Exchange. A solid gold company with a strong resource base.

  26. Fred Mathias | December 30, 2009

    I'm a gold bug. All of these comments are interesting to me. I would like to know how to invest in Paulson's Gold Fund. For any who are interested in particular gold stocks, here are two that I think will give you a real bang for your buck. NOVA GOLD (NG) and HECLA (HL) It is also interesting to me that the majority of people don't understand that you can't continue to print paper dollars with no backing by a bankrupt country and not see the value of gold. I'm 83 yrs old and have known for many of those years that the largest single problem on the planet is ignorance.

  27. stephen miller | December 30, 2009

    My clients have a minimum of 5% exposure to gold and related investments

  28. ennui hedonic | December 30, 2009

    gold will only become a choice to those with investment monies when all other income producing asset classes have become very high risk expensive or unreliable,
    america will not have catastrophic inflation in all areas, prices will remain static or within expected government ranges across a broad range of goods and services as the american indulgance factor in purchasing power diminishes over time due to redistribution of wealth across the technologically connected global market place, in australia inflation is being kept in check as product and packaging sizes are reduced rather than increasing prices to meet increased costs, slowly over the past few years for example weights of products have reduced but the retail purchase price has kept within inflation expectations, had the weight remained the same inflation would have been much higher on the end products retail price, food is an immediate example of this process, and america will demand american employees in areas where national security is at risk such as airports for travellers on any flight to america, american security is a global matter and moreso as it ups the ante in afghanistan whilst allied countiries shy away from the fight for women and girls rights.

  29. donald | December 30, 2009

    i would like to invest in this gold fund of paulsons. please let me know how. thank you

  30. Andrew | December 30, 2009

    I'm a gold and silver bug.

    My thoughts are that most investors should spread their investment out in precious metals.

    While I do own some individual gold and silver stocks, I'd suggest that most investors invest some of their money into a broad based passivley managed index funds that covers mostly gold and yet includes some silver producers too. OK, if you must have an individual investment in one or two producers then go for it but don't put all your gold money into a small number of stocks.

    Own some actual physical gold bullion (and silver too upon consideration).

    Avoid ETFs as their is much concern about some of them regarding just how secure your pooled holdings are and whom some of the custodians of those funds are behind the scenes. Many bugs also question how much actual gold are in their supposed holdings and how much is paper derivatives. Enough said.

    Good luck.

  31. Andrew | December 30, 2009

    I'm a gold and silver bug.

    My thoughts are that most investors should spread their investment out in precious metals.

    While I do own some individual gold and silver stocks, I'd suggest that most investors consider putting their money into a broad based passivley managed index funds that covers mostly gold and yet includes some silver producers too. OK, if you must have an individual investment in one or two producers then go for it but don't put all your gold money into a small number of stocks.

    Own some actual physical gold bullion (and silver too upon consideration).

    Avoid ETFs as their is much concern about some of them regarding just how secure your pooled holdings are and whom some of the custodians of those funds are behind the scenes. Many bugs also question how much actual gold are in their supposed holdings and how much is paper derivatives. Enough said.

    Good luck.

  32. dexter | December 30, 2009

    (in reply to rolf neumann's question above about why silver is a better investment than gold)

    Some reasons I think silver is a better investment than gold:

    (1) Silver has many industrial uses, for which there are poor or no substitutes. More unique uses are discovered all the time.

    (2) Silver is consumed by industry. Difficult or not financially feasible to recover trace amounts from landfills, or when weapons containing silver explode into dust, etc.

    (3) Gold market is small compared to other financial markets, and silver market is much smaller compared to gold market. A small increase in investor interest will overrun silver market.

    (4) Amount of above ground tradeable silver is smaller than amount of above ground tradeable gold. I'm not talking about grandma's antique silverware, which is not likely to come to market at current low prices. If rarity and usefulness were the criteria for valuing a thing, then silver would be priced higher than gold.

    (5) Unusually large, persistent, uneconomic paper short position against silver, which is artificially depressing the dollar price of silver.

    (6) Excessive world-wide paper claims against physical silver, 50:1 or higher, such that if every receipt holder demanded the physical silver, only the first in line would be satisfied, the rest would be defaulted upon.

    (7) Massive inflation of paper currencies by many nations. All real things should appreciate in value against massively inflated paper currencies. See John Exter's inverse liquidity pyramid.

    In any case, don't believe me. Do your own research and think for yourself. There are some good articles here http://silverstockreport.com/ Scroll down to the articles archive.

    – – – – – – –
    (in reply to ennui hedonic's run-on sentence above, in particular the statement about inflation being kept in check in Australia)

    ennui hedonic said "in australia inflation is being kept in check as product and packaging sizes are reduced rather than increasing prices to meet increased costs, slowly over the past few years for example weights of products have reduced but the retail purchase price has kept within inflation expectations, had the weight remained the same inflation would have been much higher on the end products retail price"

    I disagree. Reducing product sizes, volumes, or weights IS inflation, the same as increasing the price, because the cost per unit goes up regardless of whether you increase the price, decrease the units, or some combination. So inflation is not being held in check. What is being held in check is INFLATION EXPECTATIONS because as long as most people are tricked into believing that local currency prices are reasonably stable, they will not panic and change their behavior by spending depreciating currency on real goods rather than hold currency in cash or cash equivalents. This increase in spending would cause an increase in the velocity of money, which stokes the fires of inflation ever higher.

  33. Dimon | December 30, 2009

    "As an investor, I became very concerned about having my assets denominated in U.S. dollars,"

    he has a good reason to say this

  34. zooker | December 30, 2009

    I really take exception to the mention that all vancouver and toronto gold companies are being painted with the same criminal brush ie. toxic derivatives and naked shorting etc. Not to say this isn't going on with a few companies, but the leverage you get with juniors is unbelievable. I have made considerable money, in fact most of my money off juniors.

    Where would the industry be if not for junior exploration? Of course they're speculative because they're exploring for the next big finds which will then be bought up by the senior producers. We all know what happens to stock prices in a takeover/buyout.

    How about gpr or edr or gbg or ng or svm or gdxj?

  35. debora edholm | December 31, 2009

    Silver is a better buy than gold and is so under valued. Paulson has holdings in the following SPDR Gold Trust, Hayman Capitals hedge fund, Wyeth, Schering Plough, GFI, and Petro Canada.
    I want to address the concern over gold mining and nature mentioned earlier in Costa Rica. I agree with the man that expressed concern as this is supposed to be a green minded country and that company destroyed so much with their lack of integrity. It is a shame but what is worse is they did not have to clean up the mess and the authorities did not do much.
    We must consider the choices and investment decisions that we make for sure and gold companies need to be responsible.
    Better to invest with integrity. We do need a hedge against inflation having said that as we have to eat and pay for gasoline etc. Almost all of the corporations are polluting and getting away with it. We could look to green companies……………..

  36. Friend | December 31, 2009

    I have tons of money in gold!

  37. TropicalMonkey | December 31, 2009

    Monkey thoughts do not agree with you.
    http://goldprice.org/charts/history/gold_all_data_o_usd.png

    Still it might touch $1400 before the next historic crash.

  38. TropicalMonkey | December 31, 2009

    Monkey thoughts continues..

    And here is one more.. for Silver
    http://silverprice.org/charts/history/silver_all_data_o_usd.png

    You know what ? The crash in Gold price will make all Indian gods and their safe keepers poor among others! This monkey is from India by the way!

  39. Johnny Longbottom | January 1, 2010

    Interesting article. I wonder if a sovereign bank like India has ever bought at the top or sold at the bottom?

    And this 'competitive devaluation' you speak of; how far can interest rates FALL now?

    If interest rates go up, what happens to the price of gold?

    And the generally held theory of superstar manager and latest fad investment always makes a success, am I right or AM I RIGHT??

    As I said, pathetic hack job of some light reading you did online which was probably while watching daytime soaps.

  40. distantvoice | January 2, 2010

    Those who want a piece of Paulson's fund will need to commit $1 million for one year.

    For those of us of modest means, it feels like it's expensive to buy gold near $1100/oz. Even if you can only afford to buy a few 1/10 ounce coins, doing so will protect the purchasing power you have. Don't let TropicalMonkey's gold chart scare you. If the chart accounted for US$ monetary debasement (inflation), today's gold would be priced at least two or three times higher. Maybe more.

    I woke up years ago. From 2001-2002 I accumlated gold coins and over 1000 oz. of silver. Since then, gold more than tripled and silver more than doubled. As expensive as both metals seem today, doubling and tripling can happen again. The article above gives solid reasons for precious metal's upside.

    Mr. Longbottom: There is a long history of central banks selling gold at bottoms. Great Britain, Germany, and others. Central bank selling has mostly been a signal to buy gold. India's recent 200-ton gold purchase is a countertrend signal that gold is more important than ever. However, don't forget that these sales and buys never tap market gold. They just shift pallets of gold from one vault to another. There has never been a direct affect on the open gold market. It's always indirect.

    >> If interest rates go up, what happens to the price of gold?

    It still goes up. Higher interest rates are a recognition of inflation, perhaps even a desperate move to boost investor interest in a currency. Ignore currency trades. Gold is the ultimate currency. Silver is pretty good, too. I remember in the early 1980's a huge $3.00 hamburger could be had for a silver dime.

    So buy some gold or silver. You can always convert it to paper.

    • Piffin | January 17, 2010

      IMO, whether central banks are buyin g or selling is only half as important as WHY they are doing so!
      Recently banks were doing massive selling in a vain attempt to depress the gold price and bouy up the value of their own false money, even to selling borrowed gold.

      India's entry is different and signals confirmation that physical gold has true value rather than desparate manipulative opportunity.

      Another example of this point is from over a year ago when gold price was tilting down when the fundamental reasons for it increasing were abundant.
      Turned out that hedge funds were selling their gold in desperate attempts to raise cash to save themselves and keep head above water, not because the value of gold was actually depressed.

      So understanding WHY that price drop happened confirmed that that was an excellent buying opportunity

  41. William Cohen | January 2, 2010

    I understand the value of owning bullion in either gold or silver coins. But the numismatic coins are very appealing and there is an argument that the premium over bullion price for gold or silver coins will also grow as prices go up and presumably as more coins are melted down to meet industry demand in silver in the years to come.

    I also wish someone would post Paulsons new fund name or link.

    Anyone familiar with Constitution Mining CMIN which is going to dredge the alluvial sands at the mouths of two rivers which have been carrying gold out of the Andes Mtns in Peru for millions of years and depositing gold in the plains where the river slows down?

  42. SILVER7 | January 4, 2010

    Do ya self a favor and buy the best investment of a lifetime going 4ward and that is SILVEr….
    IT will soul shock many inthe months and years to come..Belieeeeeve!!!!!

    SILVER IS THE WAY…More bullish fundamentals than all else!!
    DO ya DD

  43. jc ross | January 7, 2010

    but how to you invest in GOLD and avoid the 15% tax gains from the irs…which will wipe out a huge percentage of your profits….or how to you invest in Gold without being seen by the irs as investing in metal itself as a collector and being taxed even more since most gold companies spread out their losses and earnings on the tax sheet they send you showing way more profit than actually you ever see??????but you have to pay income tax on it anyway….

  44. distantvoice | January 8, 2010

    jcross

    Avoid taxes by buying/selling gold and silver on eBay, at pawn shops, at antique stores. It's not that hard to avoid the IRS. Your purchases of gold are small potatoes. The IRS doesn't really care. Your sales of gold are unremarkable to the IRS, too. In fact, exchanging money for another form of money does not constitute a taxable event. Selling gold is no different than asking a bank to exchange $20 for two ten$ notes. Exchanging money for money isn't taxable. Exchanging gold for money (paper) will be no different. The IRS is not your problem.

    Don't buy gold stocks. Find an ETF or a closed end fund like GGN. Mining stocks are bad for your health, both mental and physical. Owning gold coins will feel much better. I know. I speak from experience.

    Lastly, gold isn't really an investment. It's a means of capital preservation.

    To everyone: put Jim Sinclair on your radar… jsmineset.com

  45. debora edholm | January 12, 2010

    Great comment Distant Voice. How clever as I did not think about that but will consider that. We always have to realize the tax consequences of our our investments. Thanks………..

  46. James | January 15, 2010

    ALL I NEED IS A PROCEDURE TO INVEST IN PAULSON'S GOLD FUND

  47. distantvoice | January 23, 2010

    James, I'll say it again. Start with $1 million dollars and hold for a year. Or find a derivative that crops up.

    Hedge funds like Paulson's only want the big money. Forget Paulson and buy a few gold coins.

  48. Sedinoel Z. Ochidnal | January 25, 2010

    The best vehicle if you are a Canadian is iShares's XGD.TO (an ETF with a basket of gold miners)

  49. distantvoice | May 16, 2010

    In case anyone is still following this thread, you might want to look into the Sprott Physical Gold Trust ETV (PHYS). The share price is intended to equal 1/10 the price of an ounce of gold.

    It launched in March 2010 (at $10.00) and has gone almost straight up to the $12.50 area. One article says it is selling at a 30% premium to NAV. Another article says it maintains a 1:1 ratio meaning that every dollar invested is backed by a dollar of physical gold.

    Yet another article says investors in PHYS can choose to take delivery of PHYSical gold bullion. Long term gain tax treatment is supposed to be better than ETFs, too.

    Although I mostly trust the various source articles, and I know the Sprott name to be trustworthy, verifying the details may require a long slog through SEC filings. Yahoo! Finance and other sites don't offer much research detail.

    So what's an ETV? I'm guessing it's an Exchange Traded Vehicle as opposed to a "typical" fund if there is such a thing. It used to be open-end and closed-end funds. Other kinds of funds keep popping up.

  50. Dave | June 9, 2010

    While my neighbors' 401K's have become 201K's,I have doubled my money in gold over the last 4.5 years.
    It seems that this bull run is only getting started and that we may double again within a couple years.
    Sure,gold can drop a little,but it will never go to zero,while stocks can.
    I have no idea how people with 50 or 100 grand in 401K's(stocks) can sleep at night.
    I sleep like a baby.

  51. christopher collins | September 30, 2010

    Dear Sirs,

    Please can you advise me if MrPaulson has any alert/investment service for primarily his gold fund recommendations or any other services to take advantage of future commodity prices.
    Thank you.

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