Gold Bubble Expands; ETPs Hold 9 Years of U.S. Output

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"Selling gold 'a big mistake.'"

Gold's 23% surge this year to a record is proving no deterrent to George Soros, John Paulson and Paul Touradji, whose investments signal more gains for the longest winning streak in at least nine decades.

Securities and Exchange Commission filings this month by Soros Fund Management LLC, Paulson & Co. and Touradji Capital Management LP listed investments in gold as their biggest holdings. Exchange-traded products own 2,088 metric tons, equal to nine years of U.S. mine supply, data compiled by Bloomberg show. Precious metals will produce the best commodity returns in the next year, Goldman Sachs Group Inc. said in a Nov. 9 report.

The purchases show how investors are snapping up hard assets as governments and central banks led by the Federal Reserve pump more than $2 trillion into the world financial system. Gold in exchange-traded products, as much as half of which may be held by individual investors according to BlackRock Inc., is equal to more bullion than the official reserves of every country except the U.S., Germany, Italy and France.

"People who are selling gold here are making a big mistake," said Michael Pento, a senior economist at Euro Pacific Capital Inc. in New York who correctly predicted gold's highs the past two years. "The gold bull market will end when real interest rates become positive and we're very far away from that. The Fed believes it's going to have to print more money to keep real interest rates from rising and rescue the economy."

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