Hedge fund manager John Paulson, who made billions of dollars in bets on the U.S. housing market before becoming bullish on gold, said he believes precious metals are only in the early stages of a long-term bull market.
“I think we’re at the beginning or early stages of a secular bull market in gold,” Paulson said Wednesday on CNBC’s “The Exchange.” “Gold as a substitute will continue to grow as people lose faith in paper money.”
Paulson, whose bet on subprime mortgages became one of the most lucrative trades in Wall Street history, shifted his focus to gold in 2009, arguing that unprecedented fiscal and monetary stimulus after the financial crisis would ultimately weaken the U.S. dollar. Since then, gold prices have roughly quadrupled, surpassing the $5,000 threshold before falling back.
The billionaire investor said demand for bullion continues to grow as central banks build up foreign exchange reserves along with growing private sector interest.
“Gold is becoming the world’s most suitable reserve currency, replacing fiat currencies,” Paulson said. “Demand from central banks, for example, continues to increase, as does the private sector.”
Paulson also argued that investors stand to benefit more from owning gold miners, especially those with large untapped reserves, than from the bullion itself.
“I think the best way to invest is in early-stage gold stocks,” he said.
Mr. Paulson commented: Nova Gold Resources announced that it will acquire Paulson Advisors’ 40% stake in the Donlin Gold Project in Alaska. Paulson, co-chairman of NovaGold, said the company’s vast resource base provides investors with leveraged exposure to rising gold prices.
“NovaGold has 40 million measured ounces of gold with marketed resources and reserves of $4.2 billion,” Paulson said. “I think the best way to play gold is with stocks like NovaGold, if not NovaGold itself.”
