That's what hedge fund manager John Paulson told investors at a meeting this week. What's more, he's going to plow up to $250 million of his own wealth into a new, dedicated fund to ride this bull. A word on Paulson's credentials: He made a huge bet against subprime mortgages, producing a 590% return for one of his funds in 2007 and netting himself a total of $3.7 billion. Should investors saddle up and ride alongside him this time?
Placing his bets
In fact, Paulson & Co. is already one of the largest shareholders in the SPDR Gold Trust ETF
Furthermore, the fund will invest in gold-related shares and derivatives with the goal of outperforming gold prices. Here again, Paulson & Co. is already a large shareholder in miners AngloGold Ashanti
A value, a hedge, or a speculation?
Trained as a merger arbitrageur, Paulson is a value-driven investor. Meanwhile, it's difficult to put an intrinsic value on an asset that generates no cash flows. Another value guru, Berkshire Hathaway's
Perhaps, but he isn't going it alone. Paulson is hiring John Reade, the former metals strategist at Swiss bank UBS
Two alternatives to gold
As I argue in "The Only Asset Worth Owning Today," the outlook for gold's supply-and-demand equation appears to favor further price increases in gold. As far as individual investors are concerned, some exposure to gold looks like a reasonable choice, but don't overlook other means to hedge your dollar/inflation risk, such as international stocks and high-quality dividend stocks.
Current U.S. economic policy is creating tangible risks for investors. Tim Hanson urges you to read this because the dollar is doomed. What are your thoughts on the price of gold and the viability of the dollar? Let me know in the comments section below.
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Alex Dumortier, CFA, has no beneficial interest in any of the companies mentioned in this article. Berkshire Hathaway is a Motley Fool Stock Advisor and a Motley Fool Inside Value recommendation. The Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletters today, free for 30 days. Motley Fool has a disclosure policy.