Billionaire hedge fund manager John Paulson's latest investor letter is out. He doesn't comment much on gold, but he does write the following regarding his sizable gold mining positions:

"......we believe there will be significant upside when the gold sector revalues.”

Paulson

Given the terrible performance of gold mining shares thus far in 2013, I believe this quote is quite significant - this doesn't sound like a guy who's been dumping gold stocks. Paulson remains AngloGold Ashanti's largest shareholder (7%), in addition to holding 21.8 million shares of the GLD exchange traded fund as of his latest SEC filing. The fact that he appears to have not sold any of these positions is important, however, it would be more interesting to have a better understanding of his bullish thesis (particularly after last week) and what he means by "revalues". Also, did Paulson add to his positions during last week's crash?

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AngloGold Ashanti (AU)

AU

GLD

GLD

Mr. Paulson's gold positions have taken on a decidedly contrarian character as the sector has fallen increasingly out of favor among his hedge fund peers. With P/E ratios among the senior gold producers collapsing into the single digits, it is likely that a key tenet in Mr. Paulson's bullish thesis is that the recent P/E contraction has been overly harsh. Once the market comes to the realization that peak gold is a reality, we will see multiple expansion among the gold producers anew.