Billionaire hedge fund manager John Paulson, renowned for shorting subprime mortgages ahead of the 2008 financial crisis, believes gold is only in the early phases of a long-term bull market.

Paulson argues that waning confidence in fiat currencies will continually drive investors toward the precious metal. He noted that demand is expanding beyond central bank acquisitions to include private investors as well — a broadening that, if sustained, would mark a shift from the institutional-led buying pattern that has underpinned prices in recent years.

Central Banks Sustain Purchases as Paulson Increases Mining Bets

For several years, central banks have consistently expanded their gold reserves, a trend driven largely by emerging-market institutions diversifying away from dollar-denominated holdings. A recent industry survey indicated that most institutions plan to continue growing their holdings. This trend persists even after they recorded 41 tonnes of purchases during one of gold's relatively weaker months this year.

On Wednesday night, spot gold traded near $4,121 an ounce. This marks a sharp recovery from its sub-$4,000 dip in June, though it remains significantly below the record high of $5,600 reached in late January.

"As people lose faith in paper currencies, gold as an alternative will continue to grow."

— John Paulson, CNBC

NovaGold's Strategic Expansion in Alaska

Paulson's outlook coincides with NovaGold Resources (NG) agreeing to acquire his firm's 40% stake in the Donlin Gold project located in Alaska, where Paulson serves as co-chairman. Donlin is one of the world's largest undeveloped open-pit gold deposits, making full consolidation a strategically significant move ahead of any future construction decision.

The transaction will increase NovaGold's ownership of the project to 100%. The restructuring creates a new US-domiciled company valued at approximately $4.2 billion. Under the agreement, existing NovaGold shareholders will retain about 65% ownership, while Paulson will receive the remaining 35%.

Paulson stated a preference for early-stage gold miners over physical bullion, citing NovaGold's 40 million ounces of gold resources relative to its valuation as evidence of substantial upside — a leveraged approach that typically amplifies both gains and risks compared to holding the metal directly.

However, not all financial institutions share this conviction. Following a period of market volatility, JPMorgan recently lowered its Q4 forecast for gold, even while it maintains a bullish long-term perspective — a divergence that underscores the gap between short-term tactical positioning and structural bull-market theses like Paulson's.

The NovaGold transaction requires shareholder, court, and regulatory approvals, with both companies aiming to finalize the deal in the fourth quarter.