Motley Fool has observed that John Paulson is beefing up his gold holdings, but is this a move worth following? Paulson has bought $1.3 billion in SPDR Gold Trust, and has large stakes in Goldcorp, Silver Wheaton and Yamana Gold. Paulson also revealed he has a 1.3 million share stake in Agnico Eagle Mines.
Why did Paulson make this move, with gold down and rates off 30% for the year? Here’s the catalyst. First, some investors believe gold has bottomed and is on the way up. Second, the Swiss National banks are going to hold a referendum on whether it should hold more gold. Currently, the majority of the holdings are in euros and dollars with only 8% in gold. Many are betting that with such modest holdings in the yellow metal, Swiss banks will vote for an increase. The November 30th meeting might see holdings in gold rise to 20%. So perhaps gold right now is not a bad bet.
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