Since late 2015, early 2016, there have been a number of billionaires who’ve been stealthily accumulating gold over any other form of investment opportunity that their wealth gives them access to.
When you look at how far south the gold price has managed to move over the last four years, you might reasonably question the logic of their buying spree.
The simple answer is that gold has always proven to be a pretty good portfolio hedge when the investment waters turn choppy. The first few trading days of 2016 were way more than a gentle ripple and billions were wiped off of stock values, and this prompted a spike in gold prices.
So should you be taking the hint that the super-wealthy investors have been providing with their gold buying spree?
Bet against the crowd
If you managed to become a billionaire, it is fairly safe to assume that you will have probably taken a few risks, have a knack for finding money-making opportunities and just as importantly, be prepared to trust in your own instincts and opinion, which can often mean betting against the crowd.
It is interesting to note that only half of a percent of the world’s wealth is invested in this asset, but gold tends to punch above its weight in comparison to other assets, and this is why a number of billionaire investors have been attracted to the safe haven prospects that it is always offered to provide in times of economic and political uncertainty.
Stanley Druckenmiller – The man with the midas touch
Stanley Druckenmiller is a billionaire who has been able to graphically demonstrate exactly why he is such a wealthy individual.
Druckenmiller managed to generate an average annual return from his fund of 30%, with an incredible run of success that run from 1986 to 2010, without ever having a losing year in all that time.
Considering the rollercoaster ride that you can experience with stock market investments, to never have a losing year in all that time, is very impressive, and an obvious reason why he has a net worth that is estimated to be around $4.5 billion.
Stanley Druckenmiller quit while he was ahead and closed his fund in 2010, but the key point to note, is that he subsequently holds 20% of his entire portfolio in gold. For someone with such a midas touch, that is a strong hint that you might want to follow his lead and consider this a good time to invest in gold.
David Einhorn – From $900,000 to $11 billion
Einhorn set up his fund, Greenlight Capital, in 1996. He has now built that portfolio up to a value in the region of $11 billion, and he is another prominent billionaire who has taken a shine to gold.
Einhorn has suffered some falls in the value of his portfolio as a result of his determined commitment to gold, as he has long held the view that the Central Bank’s stimulus efforts would have the effect of pushing up the value of gold at some point, when inflation started to move north.
He has been publicly vociferous about stimulus efforts and was quoted as saying that “Monetary policy and regulations have combined like a failed chemistry experiment to create a potentially destructive force that should not exist outside of fiction.”
His belief that the Fed’s intervention in markets has added to the attraction of holding gold over green, which is why his fund continues to hold about 10% of its value in gold bullion.
Ray Dalio – Hedge Fund Big Daddy
If you are in control of the largest hedge fund in the world, you are more likely to be someone who gets things right more often than you get them wrong, when it comes to investment decisions at least.
Therefore when Ray Dalio was quoted as saying ‘If you don’t own gold, you know neither history nor economics’ , you don’t need too much guesswork to get an idea of where he stands on holding a percentage of gold in his portfolio.
It would seem that Dalio considers that gold offers a sustainable allure and it has two distinct things going for it that help make it attractive to a billionaire investor, and indeed any investor seeking to achieve a profitable balance with their holdings.
The two key demand drivers for gold can be simply identified as fear and love. Fear about money supply and negative interest rate, and love, which is the cultural affinity parts of the world like Asia and the Middle East have with the precious metal.
Both of these demand drivers offer a compelling reason to buy into gold, which is a view that Ray Dalio, amongst other billionaires, appears to subscribe to.
Philanthropic Paulson also likes gold
John Paulson has amassed a personal fortune that is estimated to be worth close to $10 billion and as well as being generous with his wealth, he is also someone who takes care to protect what he has managed to accumulate.
Renowned for his philanthropy, such as giving a $400 million endowment to Harvard, he also has a strong opinion as to the current attraction of gold. Paulson owns 10.33 million shares of GLD, which is the biggest gold ETF in the world, and despite some volatility in the price, he seems committed to remain invested in gold, mainly because he sees inflation will become an issue at some point in the near future, which he believes will produce a big upswing in gold’s favor.
Considering that Paulson earned a reputation as a successful contrarian, when he famously bet against the housing market in 2007, anyone looking for a way of protecting their savings from future investments volatility, should definitely consider gold as part of their portfolio.
These four billionaires are attracted to the long term prospects of gold, and maybe you might want to take the hint and follow their lead.