Gold Mixed on Greek Optimism, Paulson Says “Buy”

Posted on: February 17, 2012

Gold prices are mixed Friday, as investors grow increasingly confident that Greece will avoid a disorderly default and secure a second bailout package before a meeting of Eurozone finance ministers on Monday. According to euro-area officials, the European Central Bank is swapping its Greek bond holdings for new Greek bonds, paving the way for a private-sector swap that will cut Greece’s debt. The news helped to boost the value of the euro against a moderately weaker dollar, fueling demand for gold as an alternative asset.

Precious metals are also finding support on comments from billionaire hedge-fund manager John Paulson, who urged investors on Thursday to buy gold as protection against inflation caused by government spending. “By the time inflation becomes evident, gold will probably have moved, which implies that now is the time to build a position in gold,” he said. Paulson & Co. is the biggest investor in the SPDR Gold Trust, with a stake valued at $2.9 billion, according to a recent Securities and Exchange Commission filing.

Michael Vogelzang, chief investment officer of Boston Advisors LLC further fueled bullish sentiment Friday, telling traders, “We think gold is going to be the beneficiary of what will be required by central banks around the globe, and that is continued monetary stimulus in whatever form.” Gold prices rose to a record high of more than $1,900 an ounce in 2011, driven largely by accommodative monetary from global central banks. Further, the World Gold Council said Thursday that central banks are also expanding their bullion reserves, adding 439.7 tons last year, the most in almost five decades.

In an exclusive interview with CNBC, Jim Rogers, the billionaire chairman of Rogers Holdings, urged investors to buy “real assets” like commodities as the situation in Europe continues to threaten markets and raise the possibility of a downturn in the global economy. “Europe as a whole is the largest economy in the world. If Europe has problems, we in the U.S. are going to feel those problems,” he said.

Rogers, who doesn’t own US stocks, warned that 2013 is likely to be more painful than 2012. “In 2012, we have elections and many governments pumping money into the economy, spending and printing money,” said Rogers. “It’s 2013-14 we have to worry about. My way of playing this is to own real assets like commodities.”