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Why Billionaires Choose Investing in Gold in Good & Bad Times

Why Billionaires Choose Investing in Gold in Good & Bad Times

August 31, 2012305 view(s)

For billionaires like John A. Paulson, a legend in the world of hedge funds, investing in gold right now makes more sense than ever before. After cashing in during the recent housing market collapse, to the tune of $15 billion, Paulson decided that gold prices favored making some massive investments because he viewed those prices as ready to rise.

The precious metals industry has long been a place for those looking to protect their wealth to do so without the kind of risks that stocks and other investments have, but Paulson is able to make moves on a grand scale and profit far past the expectations of the average investor. In fact, according to a recent article by Peter Krauth in Business Insider, gold is the preferred asset class for the renowned investor today just as it has been since 2010 when he put $250 million into a dedicated gold fund he created himself.

When billionaires start investing in gold, they have an effect on the market simply based on the level of buying power they are able to command. Some are saying that Paulson has made a mistake and that the proof is in the performance of not just his fund's performance, but also the fact that gold prices have not been rising as quickly as many would like.

Krauth noted that Paulson's inclusion of precious metals mining stocks caused the fund's value to drop 23% in the first half of 2012, yet he went on to say, "But here's the thing. His original bets against housing fell at first, too. And we all know how that one turned out. Over time, Paulson's thesis proved to be spot on."

Paulson's hedge fund is valued at $21 billion currently and over 44% has 'exposure' to the yellow metal as well as a variety of equities related to gold. Paulson even went on record as telling those who are his clients that they should seriously consider gold as a preferred asset because it is safe against inflation and even the euro crisis that is looming across the Atlantic right now. That is powerful advice when one considers the source, but it turns out that Paulson isn't the only billionaire to think that gold is such a great bargain right now.

Another major hedge fund manager, George Soros, also happens to find the current situation with gold one well worth getting involved in. The media picked up on the fact that Soros got rid of more than $50 million in stock from major banks and financial institutions like Goldman Sachs, Citgroup and JPMorgan.

At the same time, he put $130 million towards gold related assets, showing a surprising level of confidence in the metal of kings. It must be said that Soros is such a respected investor, and his moves are closely watched by many in the financial world because he has extremely strong connections in the banking industries, the political world and the realm of finance. Soros knows what's happening and this is why his opinions are deemed so important.

When some of the world's most powerful investors are taking opportunities to grab up gold, the message becomes very clear. It is quite likely that this is the time to heed that message for many, as no one knows when an opportunity like the one existing today will occur again.

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