Gold: A Billionaire’s Perspective

As of December 6, 2010 the price of gold is at a record breaking high of $1,416.10 per troy ounce. It is expected that prices could rise to $1,500.00 by the end of the year. While billionaire investors like John Paulson and George Soros are taking full advantage of the trend, it is a good idea for everyone to understand why this is happening.

Billionaire investments in precious metals do not usually involve actively participating in some modern day gold rush. It takes about ten years to locate and develop an active mine. During that time speculators sell stocks to people like famous billionaire John Paulson and George Soros, after mines have been founded, and even after the metal has been mined, when the mine lays fallow John Paulson and George Soros continue to buy stocks in those mines. Those stock prices continue to rise even though there is no gold being mined.

Billionaire John Paulson top holder of GLD added to his holdings during the third quarter. John Paulson is investing heavily in the metal in a variety of different ways. Billionaire George Soros who refers to gold as the “ultimate asset bubble,” is also still holding and buying all sorts of gold stocks as well. Billionaire stock holders like John Paulson and George Soros have vast wealth to invest but they do not buy in or sell out of a company all at once. They start buying when stock is low then add a little along. When the stock starts to drop they sell about twenty percent of their holdings and see what happens. It is rare for them to cash out all at once since their holdings are large enough to really impact the market.

Billionaire investors like John Paulson and George Soros are looking for real value, but are not above cashing in on potentially inflatable stock as well. If a stock is low but likely to rise it doesn’t really matter to them if the gold is really there or not. John Paulson will occasionally buy stock in a defunct mine, drive the price up hold it a while and then sell before it deflates. Billionaires are certainly not above exploiting an opportunity, and since many people avidly read about the investments of such Billionaire speculators as John Paulson and George Soros it is possible for their purchases to really change the face of the market.

John Paulson, George Soros and other billionaire investors are not the whole story in the rise of the price of gold though. The government of China is buying gold and steadily increasing their holdings of the actual substance. Many people believe the US government should also buy precious metals, and they probably will when the economy stabilizes a bit. The likely devaluation of the dollar and many other currencies is likely to also play a roll in raising the price of precious metals as well. Billionaire speculating only drives the price more.

Billionaires are able to stay abreast of trends, and respond to market changes more rapidly than the average investor due to their superior access to investment channels, however while some of the billionaire investments are purely speculation and market manipulation the fact is that the price of gold has gone up and real gold and mines actually producing are a great investment both long and short term. John Paulson and George Soros will no doubt hold on to most of their precious metals investment, while taking advantage of those temporary rises by cashing out a little if they believe the price will drop more than ten or twenty percent.

The fact is that gold will always be valuable. While other market commodities fluctuate and inflation takes a huge toll on currency of all kinds, gold stands alone as consistently valuable. Therefore no billionaire, especially John Paulson and George Soros will ever sell all their precious metals. It is always a good investment, and will likely rise in price even more, especially while the world wide recession continues.

It is the goal of billionaire George Soros is to own things of real value long term, while trading in things of temporary, passing, or even illusionary value short term for profit. While a defunct mine might be a passing and exploitive investment, investments in active mines, and gold holding companies will continue to be good investments throughout future decades and even centuries.