Gold and Biotech: Paulson's Contrarian Bet on Asymmetric Risk

John Paulson has long been synonymous with contrarian investing—think his 2007 housing bust bet or his 2016 gold rally call. Now, in Q1 2025, the legendary investor is doubling down on two overlooked sectors: gold and biotech. By doubling his stakes in Perpetua Resources (PPTA) and Madrigal Pharmaceuticals (MDGL), Paulson is positioning his portfolio for what he sees as asymmetric risk-reward opportunities in industries bucking broader market trends. Let's dissect the macro drivers, the data behind these bets, and why investors might want to follow suit.

The Gold Thesis: Geopolitical Tensions and Central Bank Buying

Paulson's $266 million bet on Perpetua Resources—now his second-largest holding—reflects his bullishness on gold, which he forecasts could hit $5,000 per ounce by 2028. The catalyst? A cocktail of geopolitical risks, central bank diversification away from the dollar, and inflationary pressures.

Perpetua's Stibnite Gold Project in Idaho is a linchpin of this thesis. The project, which combines gold production with antimony extraction (a critical mineral for batteries), is underpinned by an EPA-mandated environmental cleanup, reducing regulatory risks. Paulson's confidence in this asset isn't just about gold's price—it's about structural demand.

The math here is compelling. Central banks added 1,036 tons of gold to reserves in 2023, a record pace. With Western sanctions on Russia's gold reserves and China's push to de-dollarize, institutional demand is only likely to grow. Perpetua's early-stage production (expected to begin in 2026) positions it to capitalize on this trend.

Madrigal: A Biotech Contrarian Play on an Underestimated Market

Paulson's $695 million stake in Madrigal Pharmaceuticals—39.8% of his portfolio—is even more striking. MDGL's lead drug, Rezdiffra, targets NASH (non-alcoholic steatohepatitis), a liver disease affecting an estimated 25–30 million Americans. Yet the drug's Q1 2025 sales dropped 33% sequentially, sparking skepticism.

But the data tells a different story. While sales growth slowed, adoption metrics are surging:
- Prescriber adoption hit 70% among top 6,000 target doctors.
- Patients treated jumped from 11,800 (Q4 2024) to 17,000 (Q1 2025).
- Only 5% of the 315,000 diagnosed F2-F3 MASH patients under target prescribers are using Rezdiffra.

The slowdown in sales is likely a temporary supply constraint, not a product flaw. With Rezdiffra's 90% efficacy in Phase 3 trials, the real opportunity lies in the $30+ billion addressable market for NASH therapies. Paulson's long-term focus here mirrors his past bets on undervalued, breakthrough drugs—like Biogen's Alzheimer's therapy.

Why Now? The Contrarian Edge

Both plays align with Paulson's contrarian playbook:
1. Gold: While tech stocks dominate headlines, gold has underperformed despite bullish fundamentals. Perpetua's low valuation (PPTA trades at 5x cash-adjusted NAV) offers a margin of safety.
2. Biotech: MDGL's 33% sales dip has created a buying opportunity in a sector where most investors are chasing AI-driven drug discovery. Paulson's 26% upside target for MDGL suggests he's pricing in market share gains, not just current sales.

The portfolio's high concentration—98.5% of assets in top 10 holdings—signals conviction. This isn't a diversified hedge; it's a bet that these two sectors will outperform as macro risks materialize.

The Takeaway for Investors

Paulson's Q1 moves are a masterclass in asymmetric risk-reward investing. Gold and NASH therapies are underfollowed, misunderstood sectors with catalysts that could trigger sharp revaluations:
- Gold: Central bank buying, a weaker dollar, and geopolitical flare-ups (think Ukraine or the Middle East) could push prices past $2,500/oz sooner than expected.
- NASH: Rezdiffra's adoption curve is still in early innings. If MDGL can secure 50% of its addressable market by 2027, sales could hit $4 billion annually.

The contrarian call here is clear: ignore the noise of AI hype and meme stocks. Follow Paulson's focus on high-conviction, macro-driven assets. For investors willing to look past quarterly hiccups and embrace structural trends, Perpetua and Madrigal could be the next “big short”-style winners.

Final thought: In markets dominated by short-termism, Paulson's patience has paid off. These bets aren't for the faint-hearted—but then again, when has contrarian investing ever been easy?