The alchemist invests in gold

by Egon von Greyerz

Everything the world’s most successful hedge fund manager has touched in the last couple of years has turned to gold. Now he is also investing in gold. This will be the first of many fund purchases of undervalued gold shares.

Paulson said in a recent interview:

John Paulson: We believe one of the asset classes to benefit from the very expansive fiscal and monetary policies in the U.S. and other countries will be gold. The rapid expansion of U.S. sovereign debt and monetary supply may lead to diminished confidence in the U.S. dollar as a reserve currency.

As investors lose confidence in the U.S. dollar and other paper currencies, gold is likely to be a primary beneficiary.

Paulson group buys into AngloGold

By Michael Kavanagh and James Mackintosh in London

Published: March 17 2009 20:07 | Last updated: March 17 2009 20:07

Paulson & Co spent $1.28bn buying Anglo American’s stake in gold miner AngloGold Ashanti on Tuesday as the New York hedge fund moved from betting against banks to betting against governments.

Paulson, founded by billionaire John Paulson, bought 11.3 per cent of the Johannesburg miner as part of its bet that gold benefits as paper currencies suffer from the financial crisis and from governments printing money.

Mr Paulson has become one of the most closely followed hedge fund managers after his bet against subprime mortgages became the most profitable trade in history in 2007, securing profits of more than $10bn for his funds.

Gold is a traditional safe-haven purchase and has become increasingly popular with hedge funds this year as they worry about paper currencies being debased, causing inflation.

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