Exclusive: Hedge fund mogul Paulson - Gold is now 'fairly valued'

BOSTON (Reuters) - Billionaire hedge fund manager John Paulson, one of the world's most influential gold investors, said on Friday that the metal is now at an appropriate price level, following last week's rout that dragged prices to five-year lows.

Paulson, in his first public comments since the recent price crash, said his firm, Paulson & Co. Inc., has retained a 10 million share stake, now worth about $1 billion, in SPDR Gold Trust , which tracks the price of gold.

"I think gold is fairly valued today," Paulson said in an interview, adding that the market was starting to balance.

"As Western demand for gold falls because the fear of inflation is low, demand out of Asia continues to grow for it as a store of value and for use in jewelry," he said.

His outlook on gold suggests prices have little room to recover significantly as the Federal Reserve prepares to hike interest rates, probably as early as later this year, but may reassure nervous investors who have speculated whether Western funds joined the mass selling that saw prices sink 4 percent in a matter of seconds last week.

More than $500 million of gold futures were dumped in last week's sudden selloff.

On Friday, gold was at $1,094.91 an ounce, down 16 percent since the middle of January and off from a record peak of $1,900 hit four years ago.

While Paulson's hedge fund was the single largest investor in the SPDR Gold Trust at the end of the first quarter, the position, now worth about $1.05 billion, is a small portion of the $20 billion Paulson & Co's holdings. It was not among the top three holdings for the firm at the end of the quarter, according to regulatory filings.

The fund had 10.23 million shares in the SPDR Gold Trust as of March 31, and the position has not changed materially since then. Regulatory filings for second-quarter holdings will be released in August.

Paulson called the position small, but said it was a reasonable one to have because it is a hedge against the unforeseen.

SPDR Gold Trust is down 13 percent since March and down 43 percent from September 2011, when gold hit its record high.

Paulson's view on gold has been closely followed ever since he earned roughly $5 billion on a bet on the metal in 2010, following on the heels of a similarly successful $4 billion payday on his bet against the overheated housing market in 2007.

The 59-year old financier, known as a patient and long-term investor, backed off a more massive gold bet two years ago when he cut his stake in SPDR Gold Trust by roughly half, from 21.8 million shares, regulatory filings show.

Paulson & Co.'s portfolio looks very different today than it did three years ago when some portfolios invested as much as 25 percent in gold and mining stocks, and were hit hard by the metal's drop.

At the end of the 2015 first quarter, Paulson & Co had more bets on pharmaceutical and healthcare stocks than metals, owning names like Shire, Allergan, Valeant and Mylan.

"We have almost nothing in metals and very little in gold," Paulson said, adding that healthcare and pharmaceuticals stocks are the firm's biggest holdings now.

At the end of the first quarter the firm owned 26.2 million shares of miner AngloGold Ashanti, down from 27.9 million shares at the end of the first quarter in 2014. AngloGold's share price has fallen 29 percent this year.

Paulson's Advantage fund, once one of the firm's biggest and which contains some of the gold investment, was off 0.26 percent in the first two weeks of July, according to an investor. Paulson declined to say how the fund performed in the last two weeks.

Paulson's other funds have fared better, including Paulson Enhanced, which was up 19 percent for the first half of the year.

Paulson had launched a separate gold fund in 2010, but the firm stopped actively marketing it to investors two years ago after gold prices began to tumble.

"The gold fund is in hibernation, it makes up a little over 1 percent of our assets and we don't market it, but we keep it alive," Paulson said, adding, "I haven't given up interest."

(Reporting by Svea Herbst-Bayliss; Editing by Richard Valdmanis and Leslie Adler)