John Paulson gave a speech last night where he discussed his bullish stance on gold.
“I view gold as currency, I was not interested in it as currency until quantitative easing,” said Paulson during his speech.
Paulson’s fund is the largest holder of the gold ETF (GLD) and also owns almost 40 million shares of Anglogold (AU).
Paulson also also explained why any talk of gold being a bubble is preposterous right now. Paulson’s key point is that gold ownership is incredibly low.
For example, it is estimated that pension fund holdings of gold are between 0.15% and 0.5%. In the past, pension fund holdings were close to 5%. In other words, how can gold be a bubble if it is such a small percentage of the financial asset landscape?
The counterpoint to Paulson’s argument is that most high profile hedge fund managers are bullish on gold. Pension funds generally invest in income producing assets making gold an unlikely position. However, hedge fund managers can be far more speculative and there is a feeling that gold might be a crowded trade.
In addition to John Paulson, other hedge fund managers including David Einhorn, John Burbank and Michael Burry are all bullish on gold.