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Paulson Remains a Gold Bull

Release Date: 
Monday, January 31, 2011

GOLD PRICE NEWS – The gold price slid $9.75 to $1,327 per ounce Monday morning. The trading desk at BNP Paribas attributed the weakness in the price of gold to selling out of China. "The Chinese have been solid sellers all morning as they look to fund their positions ahead of the Chinese New Yr holiday," noted the precious metals team. Silver declined alongside the gold price, falling 0.5% to $27.83 per ounce.

In spite of the recent correction in the gold price, many prominent institutional investors and market pundit continue to hold their long positions in gold and investments tied to the gold price. Hedge fund magnate John Paulson, who launched a gold fund in 2010 and invested $250 million of his personal wealth in it, provided his gold price outlook in Paulson & Co.’s 2010 year-end letter.  In the letter, Mr. Paulson wrote that "We are optimistic about [gold] over the next five years and believe it is an ideal vehicle to hedge against the risk of U.S. dollar depreciation that could result from quantitative easing (QE)."

Commenting on inflation, Paulson wrote that while "there is little inflation today, we are concerned about the impact quantitative easing could have on future inflation."

Richard Russell of Dow Theory Letters, a long-time gold bull, addressed the recent sell-off in the gold price, writing that "Many doubters are now saying that after rising for ten consecutive years, the bull market in gold is probably over." Russell contended, "I've disagreed. I know that bull markets do not die of old age. Instead, bull markets die of exhaustion and of overblown excitement."

Russell went on to say that "One of the most difficult feats in investing is to enter early in a bull market and then ride or stay with the bull market all the way to somewhere near the top. That's what I've tried to do with my subscribers in this gold bull market…My contention is that the bears on gold are wrong. The bull market in gold is still alive, and I believe that in the months ahead we will see new bull market highs in both gold and silver. With this in mind, I advise you to stay with your gold and silver positions."

Marc Faber, author of the Gloom Boom & Doom Report, recently said that "If you measure the stock market not in dollars but gold, it is down 80% since 1999. I no longer regard the U.S. dollar as a valid unit of account. People shouldn’t value their wealth in dollars because one day, in dollars, everyone will be a billionaire."

Bill Gross, although not commenting directly on the price of gold, offered his view that negative real interest rates – a key factor behind the ascent in the gold price – will persist for the foreseeable future. Gross, manager of the world’s largest bond fund at PIMCO, painted a bleak picture for the future of the U.S. dollar. "We are looking at a currency that almost certainly will depreciate relative to other, stronger currencies in developing countries that have lower levels of debt and higher growth potential. And, on the short end of the yield curve, we are looking at creditors receiving negative real interest rates for a long, long time. That, in effect, is a default. Ultimately, creditors and investors are at the behest of a central bank and policymakers that will rob them of their money."

Article provided by GoldAlert.com.


This article is independently provided by GoldAlert.com and does not represent the views or opinions of Goldline International, Inc. Although the information in this article has been obtained from sources believed to be reliable, Goldline does not guar­antee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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