Billionaire Paulson Says Central Banks Will Keep Buying Gold

(Bloomberg) — Central banks will keep buying gold in a push to diversify away from paper currencies amid political and economic upheaval, according to billionaire hedge-fund manager John Paulson.

Paulson, one of the biggest bullion fans on Wall Street, says the precious metal is “moving to a new level of valuation” as investors flee from US stocks, bonds and the dollar to haven assets while an expanding global trade war casts a shadow over the economic outlook.

“The trend will continue, and the voracity of that trend will depend on political developments,” Paulson said in an interview. Gold briefly topped $3,500 an ounce for the first time ever on Tuesday following President Donald Trump’s repeated calls on the US Federal Reserve to cut interest rates immediately.

The founder of Paulson & Co Inc. has long touted his preference for gold and is heavily invested in mining firms through his family office. The financier teamed up with Novagold Resources Inc. on Tuesday to buy out Barrick Gold Corp.’s 50% stake in an Alaskan gold project for $1 billion, betting on favorable conditions for major projects in the US under the Trump administration.

Bullion is up about 30% this year, outperforming nearly every other major asset class. A surge of buying from central banks is what’s going to drive the speed of bullion price increases, Paulson said.

“The primary driver of gold demand was central banks trying to increasingly diversify out of paper currencies and into gold as a reserve currency,” he said. “I don’t think that’s going to change.”

–With assistance from Liana Baker.

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