Gold Glitters for Investor Paulson

Originally published 10/23/09 and updated with John Paulson's announcement.

NEW YORK (TheStreet) -- John Paulson, founder of Paulson & Co., makes a new bet in gold as prices hit all time highs.

The legendary investor announced on Tuesday that he would launch a gold hedge fund January 1st with $250 million of his own money. According toThe Wall Street Journal the fund will buy shares of gold miners and other physical gold related investments.

Paulson said that gold's bull market is just beginning but he has always been a strong lover of the precious metal. Paulson & Co. is the largest owner of SPDR Gold Shares ETF(GLD), a popular way to own gold. Paulson & Co. owns 31.5 million shares or $3.24 billion. Paulson also owns mining stocks AngloGold Ashanti(AU) and Gold Fields.(GFI).

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Paulson joins a long list of big time investors who are ramping up their gold investments as prices continue to skyrocket.

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At the recent value investor conference in NYC, David Einhorn, president of Greenlight Capital, said gold will do well as the currency crisis escalates and prices will head higher unless Washington implements monetary restraint, which he deemed unlikely. In fact, Einhorn told the Wall Street Journal that the massive amount of physical gold Greenlight Capital owns is being stored near Times Square.

The idea that gold is better than cash and other currencies isn't new.

Einhorn and Paulson join famed investors like Jim Rogers, who thinks gold should be at its inflation adjusted price of $2,000. Rogers told me in a recent interview that if world economies get better, "commodities are going to lead the way." But if world economies get worse, commodities will still be the place to invest because governments will have to keep printing money. Rogers isn't buying gold at record highs but he isn't selling either.