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John Paulson Makes a Comeback with His Gold Fund

October 24, 2012 | About:
matsandalex

matsandalex

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Much-maligned hedge fund manager John Paulson has seen a sharp rebound in his gold fund. According to Businessweek's article:

"Paulson’s Gold Fund, which can buy derivatives and other gold-related investments, rose 13 percent in September as bullion rallied, cutting losses this year to 3.9 percent, said the people, who asked not to be named because the information is private. The Advantage Plus Fund, which seeks to profit from corporate events such as takeovers and bankruptcies and uses leverage to amplify returns, gained 3.6 percent last month, reducing losses since the start of the year to 14 percent."

One of the hedge fund manager's big investments in 2012, Sino Forest, imploded and Hewlett-Packard (HPQ) fell to multi-year lows. To make matters worse, gold stocks were in the doldrums for much of 2012. However, the recent rally in gold stocks has been positive for Paulson's fund and his reputation.

Paulson has been massively bullish on gold since 2008.

In 2009, Paulson stated:

“What I’m looking at is not where gold is going to be tomorrow, one week from now, one month from now, three months from now. What I’m looking at is where is gold going to be vis-a-vis the dollar one year from now, three years from now, five years from now. And I think, with a high probability at each of those points, gold will be higher than it is relative to the dollar today. That probability increases the further out you go. So when I look at what the risk is, the risk to me is far more staying in dollars than it is in gold at this point.”
However, Paulson invested heavily in Anglogold Ashanti (AU) which has significant operations in South Africa. Production has stalled due to mining strikes that have ravaged the nation.

South African stability is a major part of Paulson's bet on gold stocks. AngloGold said the strike is costing it 32,000 ounces a week in lost output.

"It is regretful that matters have reached this stage, with job losses now being threatened and livelihoods for thousands of families being placed at risk," Chief Executive Mark Cutifani said in a statement.


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