Will Gold be Paulson's Next "Greatest Trade Ever"?

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When famed hedge-fund manager John Paulson speaks, people listen.

And it's no wonder.

Paulson made his way into the financial history books thanks to what many now call the "greatest trade ever".

Paulson & Co. shorted the subprime mortgage market before the collapse banking a $15 billion gain.

So when Paulson went big again by buying gold in 2009 and 2010, investors took notice.

At the time he said, "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."

In fact, Paulson's holdings in the SPDR Gold Trust (NYSE: GLD) make his firm the biggest stakeholder in this ETF, with a position currently valued at $2.9 billion.

So that begs the question....

Is Paulson still a gold bull?

In a recent letter to investors he wrote, "By the time inflation becomes evident, gold will probably have moved, which implies that now is the time to build a position in gold."

And he's not alone.

Recent filings showed that another legendary hedge-fund investor, George Soros, has nearly doubled his stake in GLD to 85,450 shares.

But "Bond King" Bill Gross's latest words and actions may well be the most significant of all.

Join the conversation. Click here to jump to comments…

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.

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  1. Dom Brunone | February 24, 2012

    Peter – Perhaps so, but if Paulson is in it, I suggest that that is a counter-indicator. Paulson's claim to fame was his one shot call of the 2008 nastiness in the mortgage market. There are serious questions about what he learned of that in advance from his GS buddies. In addition, his performance in his Flagship Fund was middling at best in 2009-2010, so just in case you were wondering if he was a great trader, he put that concern to rest with a 53% loss in Advantage Plus last year.

  2. Aprov | February 24, 2012

    Very nice article! Thank you!

  3. Hillard W. Welch | February 24, 2012

    Your hype is too much!

    I just clicked on one of your suggested items to learn about two stocks/equiities that Peter
    Krauth considers worthy of review. When I did, I was directed to a promotional message that tried to sell me Private Briefing all over again. Already being a subscriber, this did not sit well, particularly because i never did see what Peter Krauth had in mind!

    Further, your continuous promotion of three "codes" that are supposed (?) to deliver $1000+ by simply keying them in borders on fraud since the codes are not executable!!!!!!!! I tried and nothing happened. I do have a brokerage account with option privileges and have been using it for several years so I am not a novice (completely). I have also been in the advertising business for many years in my early business career and learned how to recognize "hype" when I see it.

    While I have found many things you do helpful, the continuous promotion and over-hyping of many becomes a substantial irritant and turns me off!

    Sorry, but that's what is happening as far as I am concerned.

    Consider your subscribers before you continue to bombard them with such stuff! After all, we have already "bought in" and while you would like to sell us more stuff, there is a limit!

  4. Marius | February 25, 2012

    When John Paulson speaks, people from Goldman Sachs listen.And creates ABACUS. Made from MBS supposed to fail. So John Paulson can bet against them and made some cool 15 billion. Hell knows how much GS did betting against ABACUS too…
    On other words when a crook speaks, a bunch of others listen.
    Too bad gold doesn't listen to crooks like Paulson…and does only what it has in mind…going up, going down…or going nowhere!

  5. Mk | February 25, 2012

    the gld cannot be backed to cover those investments…and china's trillion dollar hot potato of US paper will become good as gold after they drop a bunch of gold on the market. stay balanced!

  6. mad666 | February 26, 2012

    gold is under waves order too. 1790 was the top.

    The Gold Market continues to hold the green momentum channel that was developed using the last price low 1525 indicated as purchase signal, we constructed a "momentum" channel that keeps the gold market. The most important now is the price high. Price has turned into the channel making high app. 1763 only once. We estimated high for 1760-90. Is it the end of this rally?
    Is gold ready to re-enter that upper portion of the channel ? I am afraid not. Buffet’ statement did not help. Although gold is the best investment for uncertain times, still valid is question whether 1524 is the end of waves structure going from the top 1921. For the upcoming days, the 1720-1736 area is the first point to watch. If price closes above the 1740 price area, it will take ride for high. In our opinion market has no fuel for that. Green zone is still above the formed “stick” till 1710 than closing below would be a signal that market turns back and a new down leg should be under way.
    Date &time Instrument: Gold Actual Forecast Previous
    12.02.2012,14:30 Signal : sold watch purchase at 1710
    S/L: Mid term Short term
    T/P: sell sell

  7. Mike | February 26, 2012

    Look at the net flows for GLD over the last 6 months. He is talking the buy while being a HUGE net seller (sold over half his position). I would not trust anything he touts.

  8. Jumping John | August 29, 2012

    I'm with Mike – when you follow the numbers on this rather than follow the talk, then the truth becomes clear. Like they used to say on The Wire – 'Follow the money'…

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