Prominent US hedge fund manager John Paulson has expressed his view that gold is at the start of a prolonged upward trend.
In an interview on Wednesday, Paulson stated, "I do believe we are in the early or beginning stages of a long-term bull market in gold. As people lose confidence in paper currencies, gold will continue to grow as an alternative."
Paulson, who profited immensely from bets against the subprime mortgage market in one of Wall Street's most lucrative trades, shifted his investment focus to gold in 2009. At that time, he argued that the unprecedented fiscal and monetary stimulus deployed after the financial crisis would ultimately weaken the US dollar. Since then, the price of gold has approximately tripled, having surpassed the $5,000 per ounce mark before experiencing a subsequent pullback.
The billionaire investor noted that demand for gold is broadening, with central banks continuing to increase their gold reserves and private sector interest also rising.
Paulson said, "Gold is gradually becoming the world's most suitable reserve currency, replacing fiat money. For instance, central bank demand for gold continues to grow, and the same is true for the private sector."
Paulson also suggested that investors can achieve greater returns by investing in gold mining companies rather than holding physical gold directly, particularly those firms with significant undeveloped mineral reserves.
He stated, "I believe the best investment approach is to invest in gold mining stocks in their early development stages."
Paulson made these comments as NovaGold Resources recently announced it would acquire the 40% stake in the Donlin Gold project in Alaska held by Paulson & Co. Paulson, who also serves as co-chairman of NovaGold, said the company possesses substantial gold resources, allowing investors to benefit from rising gold prices with leverage.
"NovaGold has 40 million ounces of proven and controlled gold resources and reserves, yet the company's market capitalization is only $4.2 billion," Paulson said. "If not investing directly in NovaGold itself, investing in this type of mining stock is the optimal way to participate in the gold rally."
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