Paulson Sticking with Gold

I may not be reading into this enough, but Paulson likely sticking with gold.

John Paulson, the hedge-fund manager who’s lost money this year after a 16 percent decline in gold, told clients that purchases by central banks and demand in Asia will support the metal in the near term.

“Although inflation and inflation expectations remain subdued, which appears to have dampened the appetite for gold so far this year, we believe that ongoing central bank purchases and strong gold demand from China and India will help support the gold price in the near-term,” Paulson & Co. said in a letter to clients that was obtained by Bloomberg News.

Gold plunged 13 percent in two sessions through April 15, the biggest slump since 1980. Futures touched $1,321.50 on April 16, the lowest since January 2011, partly on concern that central banks in Europe will sell holdings to pay debt. Paulson, who became a billionaire in 2007 by betting against the U.S. subprime mortgage market, had about $9.5 billion of his own money invested across his hedge funds at the start of this year, of which 85 percent was in gold share classes.

“With ongoing, open-ended bond purchases, the Federal Reserve’s balance sheets continues to expand, and the Fed has now also confirmed that there is not going to be an unwinding of the stimulus through bond sales,” the hedge fund said in the letter. “This, in our view, increases the probability that money printing will eventually lead to inflation.”