Paulson, Greenlight Hit By Gold's Bear Turn

Apr 15 2013 | 11:30am ET

Two of the hedge fund industry's biggest gold bugs have been badly burned by the precious metal's swoon over the past two trading days.

Gold has fallen almost $200 per ounce on Friday and today, and are down 11% over the past week. Friday's drop alone cost Paulson & Co.'s John Paulson more than $300 million; Paulson has some 85% of his $9.5 billion fortune invested in his firm's gold shares.

Paulson's Gold Fund was already down almost 30% in the first quarter.

Greenlight Capital's David Einhorn has also relied heavily on gold, with the metal ranking as the hedge fund's third-largest position.

"The recent decline in gold prices has not changed our long-term thesis," Paulson gold strategist John Reade said. "We started investing in gold at $900 in April 2009 and while it's down from its peak to $1,500, it's up considerably from our cost."

Gold had fallen to $1,404 per troy ounce in midday trading in Europe today.

"Federal governments have been printing money at an unprecedented rate," Reade said. "We expect the strengthening of the economy and stock market to cause money supply to rise more than real growth and eventually lead to inflation. It is this expectation of paper currency debasement which makes gold an attractive long-term investment for us."


In Depth

GSAM's Papagiannis: Liquid Alternatives For The Long Run

Apr 21 2017 | 8:44pm ET

Interest in liquid alternatives cooled a bit last year amid a broad shift in investor...

Lifestyle

Aston Martin Returns To Debt Market As DB11 Drives Turnaround

Mar 31 2017 | 5:21pm ET

James Bond’s preferred carmaker is returning to the public debt markets for the...

Guest Contributor

Debunking Conventional Investment Wisdom (Part II)

Apr 17 2017 | 5:56pm ET

The alternative investment industry is currently replete with buzzwords around data...

 

From the current issue of