Today John Paulson is bullish on gold and bearish on cryptocurrencies, as he said during a recent "Bloomberg Wealth with David Rubenstein" interview.
Paulson went on to say that gold, now priced at about $1,700 an ounce, is a good investment.
"When it comes to one's investment portfolio today, 10% of it should be in gold, and it should be physical gold," concurs Mark Mobius, in a Bloomberg article. Mobius is a long-time investor, having worked 30-plus years at Franklin Templeton Investments and having founded Mobius Capital Partners.
"It is going to be very, very good to have physical gold that you can access immediately without the danger of the government confiscating all the gold," Mobius was quoted as saying.
So why do Paulson and Mobius both strongly support this shift to gold? It's because gold performs well during periods of high inflation, and we are in one. The best indicator of this, Paulson said, is the money supply, which was up about 25% last year.
Further, he believes that given the expanding money supply, we are in for worse inflation than predicted, higher than the 2% the Federal Reserve is targeting, he said.
"I think we have inflation coming well in excess of what the current expectations are," he told Rubenstein.
Paulson explained that as inflation rises, investors move their money out of cash and fixed income and into gold. However, the amount of money being moved exceeds the quantity of investable gold, thereby causing a supply-demand imbalance. This inequity thereby causes gold to rise.
If you're looking for another reason to embrace his recommendation for gold, Mobius noted the negative outlook for currencies worldwide.
"Currency devaluation globally is going to be quite significant next year given the incredible amount of money supply that has been printed" — and given the global governmental spend on fighting the COVID-19 pandemic, Mobius added.
Investing in bullion bucks the most recent trend of investors moving away from bullion-backed exchange-traded funds. During the last 12 months, the number of holdings in this type of investment dropped 8.5% as equities strengthened, Bloomberg data show.
As for the price of spot bullion, it now is about $1,816 per ounce. This compares to its peak of $2,075 an ounce roughly a year ago, when investors took flight to safe haven assets given the coronavirus. Since vaccines came online, however, bullion has pulled back some. Year to date it is down about 4%.
As for bitcoin and other cryptocurrencies, Paulson described them as "a limited supply of nothing" and says they are "lacking intrinsic value." Despite where they are trading now, they will eventually become worthless, "once the exuberance wears off or liquidity dries up," predicts Paulson.
"Cryptocurrencies are a bubble," he added. "I wouldn't recommend anyone invest in cryptocurrencies."
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