Gold, Silver & Why Paulson Hearts Bernanke

Gold investor John Paulson should send Ben Bernanke a nice present this holiday season. The yellow metal is off to the races due to the $600 billion in QE2 announced yesterday. Not unexpected, the result is still a weaker dollar and buying in all the so-called precious metals: gold, silver, platinum and palladium.

AP

Gold Bars

And John Paulson, the hedge fund manager who made billions in the mortgage meltdown, is long not just gold but gold stocks. According to this article by someone named John Carney, Mr. Paulson has an 11.3% stake, or 39,911,282 shares in AngloGold Ashanti at $32 per share. At today’s stock price, that one position has made over $930 million.

Traders and market watchers are less interested in the twin rally in silver. Questions about possible industrial shortages or margin calls were brushed off. Comments were almost universally—It’s a gold thing, everybody in the pool. Bill O’Neill, LOGIC Advisors has trouble taking rumors of industrial shortages seriously saying, “… there is enough physical silver around”. And margin calls? Bill says no, but he is hearing about buying related to options hedges. A gold bull, Mr. O’Neill today raised his outlook for gold prices to $1500 per ounce from $1400 per ounce.

And market watchers I spoke to do not expect the run to end anytime soon. Persistant underlying demand, a race to the bottom for paper currencies and a flood of money into commodity markets should keep the metals bid for the near term.

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Platinum

Gold

Silver

Palladium

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