Paulson & Co

Paulson & Co is a major US hedge fund, founded and managed by billionaire John Paulson.

Although he was still reckoned to be the world's third wealthiest hedge fund manager in September 2010 [FT 8 September 2010], he had recently seen his investments fall in value during the year.

Much of his fortune dervies from his betting the “right” way in 2007, when he “shorted” (bet against) subprime mortgages, not long before they indeed went through the floor - an event which was widely perceived as the “trigger” for the global financial collapse of 2008 .

In March 2009, Paulson bought a US$1.38 billion stake in AngloGold Ashanti from Anglo American plc, ending up with 11.3% equity in Africa’s biggest home-based gold miner, as the London-listed company exited from the South African entity it had once controlled.

Somewhat cryptically, the Financial Times commented that Paulson was thereby “mov[ing] from betting against banks to betting against governments” [FT 18 March 2009]: an allusion to received wisdom that, as the value of government-backed paper assets fall, so the value of gold as an “alternative” medium of exchange rises.

A year later, Paulson pinned his hopes on another gold miner, NovaGold, as several of his controlled funds purchased US$99,999,999 (sic) worth of shares in the Canadian mining company [NovaGold announcement 2 March 2010; see also: MJ 12 March 2010].

He went even further as the 2009 winter drew in, agreeing to purchase "at least" US$230 of convertible notes issued by Detour Gold (in which he already has a stake of 12.4%0 to finance that company's project in Ontario [MJ 19 November 2010].

By March 2011, Paulson was the largest single holder of physical units of gold in the SPDR Gold Trust - with shares valued at US$4.4 billion (see also Soros Fund Management) [MJ 20 May 2011].

However, in January 2012, the SPDR Gold Trust reported outflows of $534 million during 2011,, even though competitors, Market Vectors Gold Miners ETF and iShares Gold Trust recorded inflows of $2.8 billion and $2.7 billion respectively.

The Financial Times went so far as to call Paulson’s dominant role in the gold market a ‘curse’ and foresaw a "dash for cash" [Mining.com 9 January 2012].

According to Mining.com: "Knowing that Paulson & Co holds more gold than many central banks, and that it is struggling, it only takes a short leap of imagination to worry that he might be forced to sell it. Indeed, in the third quarter of last year, Paulson & Co sold ETF shares equivalent to roughly 34 tonnes of gold – and in September the gold price fell 11 per cent" [Mining.com ibid].

Over a year later, in November 2012, Bloomberg reported that: "Gold's 12-year rally, the longest in at least nine decades, is poised to continue in 2013 as central bank stimulus spurs investors from John Paulson to George Soros to accumulate the highest combined bullion holdings ever" [Bloomberg, 21 November 2012].

The news service went on to say that: "The metal will rise every quarter next year and average $1,925 an ounce in the final three months, or 11 percent more than now, according to the median of 16 analyst estimates compiled by Bloomberg".

Paulson & Co was reported to have a $3.66 billion bet through the SPDR Gold Trust - "the biggest gold-backed exchange- traded product", while Soros Fund Management had "increased its holdings by 49 percent in the third quarter" [Bloomberg ibid]].