Stanley Druckenmiller Changed His Mind About Gold
After the US Presidential election, billionaire hedge fund manager Stanley Druckenmiller made headlines by announcing that he had sold all of his Gold on 8 November. Yes, sold all of his Gold on Donald Trump’s election as President.
He said that the way he saw the US economy going in the future, he would not need it anymore, and that other investments would be sounder.
Now we have learned that he has reversed his position and is buying Gold.
This is proof that, no matter what happens in the short term, Gold is always the wisest long term investment strategy.
After the Donald Trump’s election, the news was that the US stock market indexes have fallen over night. Yes, the DJIA dove 870 pts in just a few hours as the results came in.
What did not get as much coverage is how, as stocks were falling, the spot price of Gold spiked 70 oz, topping out at 1,336.70 oz.
Still, Mr. Druckenmiller believed that the DJIA would be Bullish for the foreseeable future. As tax reform and other policies of the new administration would lead to overall economic growth, but that Gold, T-Bonds, and other traditional safe haven investments would fall.
He cited rising inflation rates as a reason for the sell.
The Fed raised interest rates to 0.25-0.5% at the end of Y 2015, then to 0.5-0.75% in December after the election. These are small amounts, but Mr. Druckenmiller believed the trend would continue, and that the inflation would lead investors away from Gold and to the USD instead.
Then just about 2 months later Mr. Druckenmiller changed his mind about the precious Yellow metal.
The Big Q: Why?
The Big A: Contrary to his prediction, the US Dollar (.DXY) Index began to see significant declines beginning in late December, through January.
Therefore, he wanted to own currency, so he went back to Gold in late December and January, which was priced attractively low at the time.
The investment has paid off.
While the Gold experts originally had forecast that Gold would see record lows this year, the reality is the opposite. Gold gone up by 7.9% YTD, while the DJIA has risen 4.4%
Some analysts decried Gold over the last few months of Y 2016.
It’s true that 2-H of the year trended towards Bearish the precious Yellow metal, and even its spike on Election night was short lived, with the spot price falling back to 1,273 by morning.
November and December saw a decliner from Gold’s July highs. But, if you had put your money into Gold at the beginning of Y 2016, by the end of December you would have seen a 8.5% increase in your investment.
Gold is not a get rich quick investment.
If something has the potential for a high yield in a short frame, it typically carries with it a much higher risk of failure. But, Gold can be counted on to perform well consistently over time.
And that is what makes Gold a good safe haven investment.
The stock market is volatile and frightens some people, and already some experts are predicting a Crash in Y 2017. Others say things might not get quite to that point, but that the current upward trend will top out and correct, some are saying as much as 22%. It is does it will be healthy, on the other hand there are those that see the DJIA at 23,000 sooner rather than later.
A historical note: When the market crashed in Y 2008, investors lost a total of $2-T in retirement savings. As a result, retirement became a luxury that many people could not afford. As devastating as this downturn was, it taught participants a valuable lesson: investments can turn on a dime, so it’s important to protect yourself aka hedge and that means having a percentage of a balanced portfolio in bullion and Gold mining stocks, the suggestion is a minimum of 10%
That is why having a Gold IRA is Key.
As a safe haven asset, Gold gives the investor something to fall back on when the stock markets correct, they always correct. Plus, it tends to go up when other markets decline. So when your stocks lose their value, your Gold investment picks up the slack and prevents you from suffering what would otherwise could be big loss.
Hedge fund manager like Stanley Druckenmiller knows that, and it is likely why he did not shun Gold for very long.
Several other experts have a Bullish outlook for Gold in Y 2017 and beyond. So, now may be the time to invest in the precious Yellow metal, while its price is still relatively low.
It is your money, it is your responsibility.
|HeffX-LTN Analysis for GLD:||Overall||Short||Intermediate||Long|
|Bullish (0.27)||Bullish (0.25)||Bullish (0.29)||Bullish (0.28)|
|HeffX-LTN Analysis for DIA:||Overall||Short||Intermediate||Long|
|Bullish (0.26)||Neutral (0.10)||Bullish (0.31)||Bullish (0.38)|
Have a terrific week.
Latest posts by Paul Ebeling (see all)
- Asia: Gold, USD, Crude Oil, Stocks & Commodities - August 19, 2019
- Commentary: Paul Ebeling on Wall Street - August 19, 2019
- Special Report (Part 1): The Center of the World is Moving to Asia - August 19, 2019