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John Paulson, billionaire hedge fund manager, indicated that the current gold coin prices are a sign it is time to buy because they will be the best hedges against inflation due to government spending.

February 17, 2012 – John Paulson, billionaire hedge fund manager, indicated that the current gold coin prices are a sign it is time to buy because they will be the best hedges against inflation due to government spending. Paulson & Co. is the biggest investor in the SPDR Gold Trust with about $2.9 billion allocated to gold according to a Securities and Exchange Commission filing on February 14 of this year.

In terms of fundamentals, Paulson could not be more accurate, as the spending in Washington continues despite the serious fiscal problems engaging our country. The Secretary of the Treasury recently went back to Congress and got approval for a further increase in the debt ceiling after a contentious debate shut down Washington over the summer. The Federal budget deficit is at a record high under the current administration, and the administration preceding it, which happened to be of the other political party, spent more in its eight years than was spent in the preceding two hundred.

This kind of spending cannot continue forever without some repercussions in the financial markets and Paulson is simply using logic in his forecast. The spending that has gone on in Washington, despite the will of the American voter and taxpayer, is already apparent when you look at current gold coin prices. The more dollars that are printed into existence through inflationary monetary policy and through deficit spending dilute the purchasing power of the dollars already in existence.

This provides a relative increase in value in the price of gold as the precious metal balances itself out in a hostile market. The price of gold is fairly constant with only so much of the precious metal available on the open market and only so much coming to market from mining operations on a daily basis.

Thus, the price of gold is much more secure than the value of the dollar. Paulson is on the money when he points his finger at inflation in the dollar and calls it one of the chief reasons investors are more bullish on gold now than they have been even in the past three years. Current gold coin prices may be the most affordable we see and very much a buying opportunity as we go forward and the inflationary spending in Washington necessarily drives the price of gold higher.

Kevin Johnson

Senior Staff Writer – GoldCoin.net

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