24/7 Wall St.

We aren’t going to bother telling you the news on Goldman Sachs being charged by the SEC with fraud over mortgage products.  The notion that hedge fund Paulson & Co. is being implicated and tied to this fraud does have serious implications elsewhere.  Whether it ultimately has any impact is still unknown, but the Paulson-Goldman angle is taking its toll on the gold market today.  This is hitting SPDR Gold Shares (NYSE: GLD), NovaGold Resources Inc. (NYSE: NG), Kinross Gold Corp. (NYSE: KGC), AngloGold Ashanti Ltd. (NYSE: AU), and Gold Fields Ltd. (NYSE: GFI) directly as Paulson holdings.  After these drops, even the non-Paulson companies will trade lower in sympathy.

In a recent call, our affiliate Adam Hewison of INO recently put $1,150.30 as the critical pivot to watch in gold for other reasons and he outlines what to expect down the road in much more detail.  That was a call of a technical nature, not one of Paulson ties.  With spot gold at $1,134 to $1,135 per ounce on a $24.00 drop, that $1,150.30 may now be the next ceiling rather than floor.

The reason that Paulson being implicated in the gold trade is that Paulson & Co. opened up a hedge fund to make bank on the long-term move that may come in the gold markets.  If he is implicated too deeply in the SEC charges, again IF, then traders are betting that there will be an exodus from his funds and that Paulson will have to sell just to deal with redemptions and client losses. Here are just some of the Paulson holdings:

• NovaGold Resources Inc. (NYSE: NG)
• Kinross Gold Corp. (NYSE: KGC).. PAULSON & COMPANY, INC. with 23,550,000.. 3.34%.. $308,740,500.. Dec-31-09
• AngloGold Ashanti Ltd. (NYSE: AU).. PAULSON & COMPANY, INC. with 42,849,864.. 11.99%.. $1,721,707,535.. Dec-31-2009
• Gold Fields Ltd. (NYSE: GFI) PAULSON & COMPANY, INC. with 23,550,000.. 3.34%.. $308,740,500.. 31-Dec-09

Again, this is the trade happening on Wall Street today.  One fund and one man won’t likely fix the trade forever.  You know trades, they go for the gold (no pun intended) when it comes to “where there is smoke, there is fire” theory.

JON C. OGG