Shining golden week

According to Alec Hogg, this week has been all about gold.

Felicity Duncan
19 March 2009 17:15 

With all the chaos in the world - big banks blowing up, normally responsible governments printing trillions with abandon, and even pirates trawling the high seas - it's understandable that investors are looking for the safest assets they can find, and this is where gold comes in.

As safe harbours go, gold is an all-time favourite. The gold price has rocketed upwards ever since the disaster-riddled nature of the global financial system became apparent. Right now, gold is trading at $950, and it's tapped to head upwards as the real economy sputters.

According to Moneyweb editor-in-chief Alec Hogg, speaking in the weekly Boardroom Talk Podcast, there can be little doubt that this week, gold has held centre-stage.

On the gold price, Hogg said: "[Thursday] was a big day for gold, [Wednesday] night when the Fed decided it was going to spend a whole lot more money, pulled out of thin air, gold bulls got excited, pushed the gold price up $35 and as we're talking right now, coming from a level of around 890, it's now trading 935 to 950."

"The Americans, certainly the mid-Americans or middle Americans, tend to love gold and they're going for it in a big way. Nick [Holland, CEO of Gold Fields (JSE: GFI)] said he'd just returned from America and he heard some fairly reputable commentators over there now talking about $2 500 an ounce."

"But what was interesting was the reasoning behind Nick Holland's view. He didn't say it would go to $2 500, but he also felt that it would go north of $1 000 in the not too distant future. He felt that the inflationary boosts that are going on in the United States are likely to have a direct impact on what he produces."

Mark Cutifani, CEO of AngloGold Ashanti (JSE: ANG), took a similarly bullish view.

"What was interesting and more supportive of this view, we had a ten minute chat on Wednesday ... after John Paulsonhad made an investment of 11%, or he paid just over $1bn for 11% of AngloGold [we had a chat with] Mark Cutifani."

"And what is interesting here, and Mark said he met John Paulson in the past, John Paulson, when you start digging into his background, is quite an incredible investor. Forbes magazine rates him as one of the top three. Steve Forbes said that if we were to have a Mount Rushmore for investors, in the United States - Mount Rushmore which you well know because you've been there, have got the heads of presidents on a mountain - and if we had them for investors, he said, it would be Bill Gross of Pimco, Warren Buffett and John Paulson. So that puts him right up in the very top league."

Paulson shot to fame after his hedge fund took a large bet against the sub-prime debt holders and house price.

Explained Hogg: "Personally he made billions of dollars. Last year he went from position 175 to a position in the top 75 on the billionaires' list and the primary reason for that is that his company, which has come from nothing, has now got assets of $35bn."

Given Paulson's investing acumen, and the prestige he now has, it's very interesting that he has chosen to get in on the gold game.

"He's betting on gold and more specifically he's betting on Mark Cutifani's firm, AngloGold Ashanti. So that's a very strong tip for us. John Paulson, who is like a Warren Buffett, makes [a] substantial investment in a South African-based company that is in the gold market."

"And we had [further] support of that as well in another of the podcasts with market commentators through the week - the one that is always the best read is with the Allan Gray commentators - and [Allan Gray director] Delphine Govender was explaining that they are overweight gold in the Allan Gray portfolios and overweight AngloGold in the gold side of the portfolios, so AngloGold is also their favourite."

For Hogg's insights on the Huge Group (JSE: HUG) SSF debacle, and the troubles of Super Group (JSE: SPG), check out the Boardroom Talk Podcast.