Even though gold has taken a nose dive this year amidst fears about the Fed tapering its bond-buying program, hedge fund titan John Paulson still likes it. He loves housing too, according to his comments at the Delivering Alpha conference.
Criticism of gold investments continue
Paulson became famous in 2007 when he bet against subprime housing, but since then, his strategies have been heavily criticized, especially when it comes to gold. The precious metal has been slumping in recent weeks, but he believes that the same rationale for owning gold still applies—even if and when the Fed does start tapering. However, he pointed out very quickly in his Delivering Alpha speech that only about 2 percent of his fund’s portfolio is in gold right now.
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Gold prices have plunged to about $1,200 per ounce before rebounding slightly, but Paulson believes that this is just a pause in the metal’s pricing trend. He thinks demand for gold will rise again if the economy strengthens and indicators of inflation increase.
Paulson warns about inflation
In his Delivering Alpha speech, John Paulson also said we’re at an increasing risk for rapid inflation right now because of how much money the Federal Reserve has printed recently. He said that there hasn’t been much inflation yet in spite of the large amount of cash that’s been printed. As a result, he sees sudden, high rates of inflation ahead and views gold as an alternative to currency which would provide some protection against inflation.
He emphasized that his bet that the Fed’s quantitative easing policies would trigger inflation just hasn’t paid off yet. He also said that many people who bought gold expecting inflation because of the policies have begun to get impatient, but the question isn’t whether printing money will trigger inflation. He says it’s just a matter of when.
Paulson now loves housing
In addition to gold, the hedge fund titan also said he likes housing right now. Of course his bet against subprime mortgages years ago paid off big, but now he’s changed his view of the housing industry and says he likes it. In his Delivering Alpha presentation, Paulson said one part of the economy that is actually recovering is housing.
He believes it has bottomed out and that right now “buying a home is the best investment any individual can make.” “Affordability is still at an all-time high,” he said.
Other areas of strength he mentioned briefly at Delivering Alpha include possibilities for mergers and acquisitions.