Gold has been popular with the elite for millennia, going back to ancient Egyptian pharaohs. It has consistently held an allure for the wealthiest and most powerful people who existed. Today, many of the world's wealthiest individuals, such as Ray Dalio, John Paulson, Lord Jacob Rothschild and Naguib Sawiris, recognize the benefits of holding gold as part of their investment portfolios. This article breaks down the benefits these billionaires experience investing in gold and how you can take advantage of them.
Safe Haven and Store-of-Value Asset
One of the primary reasons billionaires invest in gold is because it serves as a safe haven and store-of-value asset. During times of economic instability or market volatility, gold tends to hold its value or even appreciate, providing a level of protection for investors.
Ray Dalio, the founder of Bridgewater Associates, the world's largest hedge fund by a wide margin, is one of the biggest advocates of gold. Dalio has long preferred holding gold to cash, and he recently told CNBC in an interview in early February that he expects cash to outperform stocks and bonds this year, underscoring the need for other safer assets like gold.
Lord Jacob Rothschild, the leading member of the famous exorbitantly wealthy banking family, also prefers gold to the U.S. dollar. The Rothschilds have a long history of holding gold. They claim that they supplied the Duke of Wellington with gold to help defeat Napoleon over 200 years ago.
The family significantly reduced its large position in U.S. dollars in 2016 and purchased gold and other currencies. They are so enamored with the metal that it says on its archive website that “The history of gold trading would be incomplete without the Rothschilds, and the history of the Rothschilds would be very different without gold.”
Long Exposure to Fear
Warren Buffett, the founder of the monolithic firm Berkshire Hathaway and one of the most successful investors of all time, is not a huge fan of gold. He is a rabid supporter of productive assets like real estate and profitable businesses. Nevertheless, Berkshire purchased more than half of a billion dollars in Barrick Gold, one of the largest mining companies in the world in 2020. The exact reasoning behind the decision hasn’t been revealed, but analysts like Shubham Raj from The Economic Times believe that it was a hedge against further economic turmoil caused by COVID-19 and global lockdowns.
This theory is supported by Buffett’s previous statements about the metal. In 2011 he said that gold is “a way of going long on fear, and it has been a pretty good way of going long on fear from time to time.” He goes on to say that “you really have to hope people become more afraid in a year or two years than they are now. And if they become more afraid you make money, if they become less afraid you lose money, but the gold itself doesn’t produce anything.”
Buffet clearly prefers productive assets in the long run, even though gold can be a good way to gain exposure to increasing fear and uncertainty in the markets. This belief is related to its status as a safe-haven asset. Gold likely won’t be extremely profitable, but it probably won’t lose a ton of value either.
Do These Benefits Hold up for Everyday Investors?
Most people can’t use the same investment strategies as billionaires. They can’t go out and buy an undervalued profitable company like Buffett or make thousands of scalping trades a day for a fraction of a penny of profit each. On the other hand, buying gold is one of the easiest investments popular with billionaires. Almost anyone with more than a few dollars can invest and derive these benefits from it.
Investors are turning to gold and silver in droves to protect their portfolios as uncertainty rises in the economy. Check out Benzinga’s Advantage Gold Hub, its preferred source for purchasing physical gold and in IRAs, to master the sector and discover the best precious metals trading platforms.
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