Gold Bulls Expand as Billionaire Paulson Says Buy
Gold Bulls Expand as Billionaire Paulson Says Buy
Daniel Acker/Bloomberg
Pure gold casting grain.
Pure gold casting grain. Photographer: Daniel Acker/Bloomberg
Feb. 17 (Bloomberg) — Michael Vogelzang, chief investment officer at Boston Advisors LLC, talks about the outlook for U.S. stocks and his investment strategy.
Vogelzang also discusses the impact of Europe’s debt crisis on global markets. He speaks with Susan Li on Bloomberg Television’s “First Up.” (Source: Bloomberg)
Paulson Co. Inc. President John Paulson
Jin Lee/Bloomberg
John Paulson, president of Paulson Co. Inc.
John Paulson, president of Paulson Co. Inc. Photographer: Jin Lee/Bloomberg
Gold Bulls Expand as Billionaire Paulson Says Buy
Paul Taggart/Bloomberg
Gold rose 9.8 percent to $1,721 an ounce this year on the Comex in New York.
Gold rose 9.8 percent to $1,721 an ounce this year on the Comex in New York. Photographer: Paul Taggart/Bloomberg
Gold traders are getting more
bullish after billionaire hedge-fund manager John Paulson told
investors it’s time to buy the metal as protection against
inflation caused by government spending.
Twelve of 22 surveyed by Bloomberg expect prices to gain
next week and five were neutral. Paulson Co. is already the
biggest investor in the SPDR Gold Trust, the largest exchange-
traded product backed by bullion, with a stake valued at $2.9
billion, a Securities and Exchange Commission filing Feb. 14
showed. Investors have 2,389.7 metric tons in ETPs, within 0.2
percent of the record reached in December and more than all but
four central banks, according to data compiled by Bloomberg.
Speculators in U.S. gold futures are now their most bullish
since September after the Bank of England and Bank of Japan said
they will buy more assets and the Federal Reserve said it was
considering purchasing more bonds. Central banks are also
expanding their bullion reserves, adding 439.7 tons last year,
the most in almost five decades. They may buy a similar amount
in 2012, the London-based World Gold Council said yesterday.
“The appalling state of fiscal finances of most industrial
nations does lead to concerns about the possibility of
inflation,” said Mark O’Byrne, executive director of Dublin-
based GoldCore Ltd., a brokerage that sells everything from
quarter-ounce British Sovereigns to 400-ounce bars. “Gold is a
crucial diversification given the various risks out there.”
Bank of America
Gold rose 9.9 percent to $1,722.20 an ounce this year on
the Comex in New York. The Standard Poor’s GSCI gauge of 24
commodities gained 6.6 percent and MSCI All-Country World Index (MXWD)
of equities climbed 9.7 percent. Treasuries lost 0.5 percent, a
Bank of America Corp. index (MXWD) shows.
Hedge funds and other money managers boosted wagers on
higher prices by 57 percent since mid-January. They raised their
net-long position by 8.6 percent to 173,172 futures and options
in the week ended Feb. 7, the highest level since mid-September,
Commodity Futures Trading Commission data show.
Central banks are keeping interest rates at or near record
lows and expanding stimulus measures to spur growth that the
International Monetary Fund predicted on Jan. 24 will be 3.3
percent this year, down from a previous forecast of 4 percent.
Greece is seeking more aid on top of the 110 billion euros ($145
billion) awarded in 2010 and Moody’s Investors Service cut the
ratings of six European nations on Feb. 13.
‘Build a Position’
“By the time inflation becomes evident, gold will probably
have moved, which implies that now is the time to build a
position in gold,” New-York based Paulson said in a letter to
investors obtained by Bloomberg. Armel Leslie, a spokesman for
Paulson, declined to comment.
The 56-year-old manager’s SPDR Gold Trust holdings fell 15
percent in the fourth quarter as his $23 billion hedge fund
company had its worst-ever year. His Advantage Plus Fund lost 51
percent in 2011, and the firm said in a third-quarter letter
that financial services companies were the “primary drag.”
Paulson became a billionaire in 2007 by betting against the U.S.
subprime mortgage market. Gold rose 10 percent last year in New
York trading, an 11th consecutive annual gain.
Europe’s deepening debt crisis may spur some investors to
retreat to cash. Bullion dropped 3.4 percent in the three months
through December, the first quarterly decline since 2008, as the
value of global equities slumped more than $10 trillion from the
May peak, data compiled by Bloomberg show.
Debt Crisis
“Despite the strong start to global markets this year, the
underlying sentiment is still one of fear,” said Chris Weafer,
the chief strategist at Troika Dialog, an investment bank in
Moscow. “Until the euro zone debt crisis is put to bed, all
assets, even gold, are in the risk category.”
Investors should avoid gold because its uses are limited
and it lacks the potential of farmland or companies to produce
new wealth, Warren Buffett, the billionaire chairman of
Berkshire Hathaway Inc., wrote in an adaptation of his annual
letter to shareholders that appeared on Fortune magazine’s
website on Feb. 9.
Vinik Asset Management LP, Tudor Investment Corp. and SAC
Capital Advisors LP sold shares in the SPDR Gold Trust in the
fourth quarter, filings showed this week. George Soros, the
billionaire founder of Soros Fund Management LLC, raised his
stake to 85,450 shares from 48,350.
Record investment drove gold demand to 4,067.1 tons last
year, the most since 1997, the World Gold Council estimates.
Nine of 24 traders and analysts surveyed by Bloomberg
expect copper to climb next week and seven were neutral. The
metal for delivery in three months, the London Metal Exchange’s
benchmark contract, rose 7.4 percent to $8,161.50 a ton this
year after declining 21 percent last year.
ICE Futures
Ten of 14 people surveyed expect raw-sugar prices to drop
next week. The commodity is up 1.8 percent this year at 23.72
cents a pound on ICE Futures U.S. in New York.
Eleven of 21 people surveyed anticipate lower corn prices
next week, while 12 of 22 said soybeans will advance. Corn fell
0.3 percent to $6.4475 a bushel this year as soybeans rose 5.7
percent to $12.77 a bushel.
“By initiating further rounds of quantitative easing,
central banks should be one of the supporting factors for
commodity prices,” said Daniel Briesemann, an analyst at
Commerzbank AG in Frankfurt. “The high uncertainty and growing
risk aversion among market players surrounding the Greek debt
saga should depress any meaningful price increases.”
Gold survey results: Bullish: 12 Bearish: 5 Hold: 5 Copper survey results: Bullish: 9 Bearish: 8 Hold: 7 Corn survey results: Bullish: 7 Bearish: 11 Hold: 3 Soybean survey results: Bullish: 12 Bearish: 9 Hold: 1 Raw sugar survey results: Bullish: 2 Bearish: 10 Hold: 2 White sugar survey results: Bullish: 2 Bearish: 9 Hold: 3 White sugar premium results: Widen: 5 Narrow: 6 Neutral: 3
To contact the reporter on this story:
Nicholas Larkin in London at
nlarkin1@bloomberg.net.
To contact the editor responsible for this story:
Claudia Carpenter at
ccarpenter2@bloomberg.net.
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