Billionaires Investing in Gold
Some of them disparaged the rush to buy gold years ago. Others maintained a meager amount of this precious metal in their investment portfolios simply for the purposes of diversification.
However, many of the world’s billionaires have now come around to the understanding that gold’s high market value is here to stay. Inflation has been no small impetus causing them to expand the portion of their holdings that contain gold and gold stocks.
“Investors are moving to real assets. The U.S. dollar is very weak.”
(net worth of $22 billion)
Perhaps the most dramatic story in this gold rush is that of George Soros. This billionaire has been in the news for years and not just in regard to his wealth. He is a major funder of Democratic causes and often speaks out on economic issues that are important on the world stage and in the United States in particular.
In a 2010 interview, he referred to gold prices as the ultimate bubble. Using the word bubble was particularly derogatory because of the dot com bubble that had destroyed fortunes in the earlier part of the decade and the housing bubble that had popped so calamitously just a few years before the interview.
How had things gotten this way?
At the beginning of the century, gold was not valued much more highly than it had been for decades. Sitting at around $300, most investors considered it wise to own a small amount of gold and gold stocks just because gold was always solid. However, if you wanted to make money aggressively, you tended to look elsewhere.
Then gold began a slow but steady climb over the next few years. In 2007, when the experts began to predict that problems were looming in the future for the economy, the price of gold appeared to spike.
In 2009, the price reached $1,000. At that point, critics such as Soros aired their complaints. They referred to promoters of gold as an investment as gold bugs and pointed back to an apparently similar gold rush in 1980.
Back then, fears of a very real inflation rate caused the price of gold to leap all the way to $600.
Shortly thereafter, that gold bubble popped and the price dropped below $300. Gold spent the next two decades as a decent but conservative investment for most people.
Last year, though, it appears that Soros altered his perspective a bit. His fund sold tens of millions of dollars in stock and bought up gold. By then, gold had reached to more than $1,500 per ounce. In fact, during 2011, gold went as high as $1,900 an ounce before settling back down to something more like $1,600 on most days.
So why would a brilliant investor like George Soros invest money when it appeared that he might be right about the gold bubble popping?
After all, gold has pretty firmly backed off its highs from last year. Yet Soros seems in no hurry to dump his considerable investment in this precious metal.
He will not drop his gold investment because he knows what everyone else understands when they consider all the factors at play in the world economy and, in particular, the US economy.
Government economic policies, such as quantitative easing, have ruined the value of the US dollar. Like any investor, Soros and the other billionaires who buy gold are looking for something solid in which to settle their money.
A lot of people are talking about the so-called mystery of the high market averages during this down economy. People like Soros know that there is no mystery.
Stocks are not really performing that well. They are valued in inflated dollars and just appear to be gaining. With few exceptions, the one investment that is keeping up with inflation and even outpacing it is gold.
Other Billionaires Have Seen the Light of Gold
Soros is not alone in his understanding of the present economic realities. Many billionaires have moved heaven and earth to get involved in gold. Men like Frank Giustra and John Paulson are also betting on gold as the investment of the future.
John Paulson is the head of a $24 billion fund. He has recently directed its purchases so that a whopping total of 44% of its holdings are now in gold in one way or another. This is a gamble of shockingly high proportions.
Even many adherents of the gold gospel only recommend putting 10% or less into gold. Paulson is known for his investment genius, having made hundreds of billions in previous years.
If he is willing to risk so much of a single fund, then there must be something in gold about which the rest of the investment world does not know.
Billionaires and entire nations are buying up the world’s gold reserves. Nations like India and China have ramped up their gold purchases as well. They know what the billionaires know.
There is no confidence left in paper currencies. Investors want something real that has demonstrable value and which spendthrift governments cannot print. Gold appears to be the answer to their prayers.
Here’s an article on ABC news about Paulson and Soros and gold.