Paul Tudor Jones Likes Gold

Gold is Paul Tudor Jones’ Favorite Trade Over the Coming 12-24 Months

In a recent Bloomberg interview, legendary trader and hedge fund manager Paul Tudor Jones was asked what areas of the markets currently offer the best opportunities in his opinion. His reply: “As a macro trader I think the best trade is going to be gold”. The relevant excerpt from the interview can be viewed below (in case the embedded video doesn’t work for you, here is a link to the video on Bloomberg).

This is worth mentioning for the simple reason that Paul Tudor Jones has an outstanding track record as a macro trader. His long term annualized return is close to 20%, although the results of his flagship fund were less spectacular in recent years, as he has deliberately adopted a more conservative investment style.

It is obviously not easy to swing for the fences with a hedge fund that has several billions of USD in assets under management. What’s more, many institutional investors these days seem mainly interested in getting small, dependable returns amid low volatility – and Tudor Jones seems to have adapted accordingly. Nevertheless, when he identifies a specific asset class as his favorite trade, it is probably worth paying attention.

For readers not familiar with Paul Tudor Jones, he originally rose to fame for correctly anticipating both the stock market rally of the 1980s and the 1987 crash (here is a documentary on this feat, which is well worth watching). He realized at the time that the 1980s stock market boom looked eerily similar to the 1920s boom. By comparing the two patterns, he was ultimately able to precisely pinpoint the market peak and time the crash. His fund returned 125.9% after fees in 1987. As his long-term returns attest to, this was by no means a fluke – the man definitely knows what he’s doing.

Paul Tudor Jones really likes gold (and treasuries)

Addendum: Speculative Positioning in Gold Futures

As we suspected in our gold update last week (see A Surprise Move in Gold for the details), speculators have added quite a bit of exposure on the long side in gold futures as the recent rally unfolded. However, as you can see from a long-term chart of the net hedger position (the inverse of the net speculative position), there is still quite a bit of room for the net speculative long position to grow – provided a cyclical bull market is indeed getting underway.

According to last week’s CoT report the net commercial hedger short position has grown to around 172,000 contracts. In a bull market, this position is likely to become much larger before it poses a problem – the likely target range is indicated by the green rectangle at the bottom of the chart.

Gold Hedgers Position, 2009-2019

- Click to enlarge