NovaGold Stock Soars 40% After Billionaire Paulson Makes a Bold Bet on Gold – Should You Follow?

Gold prices have reached record highs in recent days amid the US market turmoil. The rally gained further momentum after US President Donald Trump's plans to oust Federal Reserve Chair Jerome Powell fueled concerns over the central bank's independence, driving investors to gold and out of the dollar.

Gold is a time-tested tangible asset that shares a negative correlation with stock market movements and grows investor wealth through value appreciation, given its universal demand, exchangeability, and portability. Investors have several ways to gain exposure to gold: buying physical assets, investing in exchange-traded funds that track the price of the asset, or investing in gold mining companies.

On Tuesday, NovaGold Resources (NYSE:NG) (TSX:NG) shares soared almost 40% to £3.27 ($4.35) after billionaire investor John Paulson's firm entered a deal with the company to buy a stake in Alaska's Donlin gold mine project. The Paulson Advisers hedge fund, under the investment company Paulson & Co., is working with Canada's NovaGold Resources to purchase Barrick Gold's (NYSE:GOLD) (TSE:ABX) 50% stake in Donlin Gold, which operates a gold-mining project in Alaska. The Paulson-backed transaction is valued at £752.03 million ($1 billion). Upon deal close, Paulson's firm will hold the majority of the acquired stake in the project.

NovaGold can also buy outstanding debt owed to Barrick Gold linked to the Donlin project for £67.68 million ($90 million) if opted for before the transaction closes. The deal is expected to be completed by Q2 or early Q3. However, the debt will remain outstanding if that option isn't exercised.

NovaGold's stock surged on the news, while shares of Barrick Gold fell over 2%. However, Barrick's shares are up 29% year-to-date.

'Donlin Gold is one of the most attractive development gold projects in the world. With 39 million ounces of gold at double the industry-average grade and an optimal location in the prime jurisdiction of Alaska - already the second-largest gold-producing state in the United States - we believe that the project could create value for decades to come,' Paulson said in a statement.

Paulson highlighting that the gold mining project is located in the prime jurisdiction of Alaska is crucial because many mining companies are located in politically sensitive regions and often face regulatory hurdles.

Paulson is an Active Gold Investor

According to Forbes, Paulson has a net worth of £2.85 billion ($3.8 billion). Apart from his latest decision to increase exposure to the Alaskan gold-mining project, Paulson holds stakes in multiple gold-mining companies through his family office, including stakes in Seabridge Gold, Equinox Gold, and Iamgold, as of 2024-end, according to WhaleWisdom data.

The NovaGold deal comes days after Oppenheimer technical analyst Ari H. Wald highlighted four stocks from the VanEck Gold Miners ETF GDX offering better value than investing in gold itself.

'We've maintained a bullish outlook on the price of gold since the start of 2024 and have preferred the commodity over the equities that mine for the commodity,' Wald had noted. 'Our relative preference has shifted toward the gold miners (GDX) based on a decade-long base positioned to inflect higher vs. spot gold.'

Paulson is also known for his profitable trades during the subprime mortgage bubble over a decade ago. Before the 2024 presidential election, he said he would withdraw his money from the market if former US Vice President Kamala Harris were elected president.

'I'd go into cash and I'd go into gold, because I think the uncertainty regarding the plans they outlined would create a lot of uncertainty in the markets and likely lower markets,' he had told Fox Business.

Disclaimer: Our digital media content is for informational purposes only and not investment advice. Please conduct your own analysis or seek professional advice before investing. Remember, investments are subject to market risks and past performance doesn't indicate future returns.