Gold, in U.S. dollar terms, has gained 10.92% year-to-date in 2017 and has risen 20.41% since January 1, 2016 (as of 11/15/2017)1 — a fact largely ignored by a majority of market participants. Despite this strong performance, investment allocations into gold bullion and gold equities remain muted, and we have found this rather perplexing.
Gold has traditionally been regarded as portfolio insurance for wealth preservation, something akin to buying home insurance for your house. It is negatively correlated to most equities and has served to reduce volatility when added to a traditional portfolio of equities and bonds. With the S&P 500, Dow Jones and Nasdaq Indices trading at all-time highs, and valuations at levels not seen in almost two decades, some investors are rightfully worried about the potential downside to their portfolios. Indeed, this is exactly the environment that prompts serious investors to begin giving gold a hard look as portfolio insurance. While the current appeal of gold seems like a no-brainer, too many investors remain uninvested or terribly underinvested in the precious metal.
Recently, we’ve seen some encouraging signs of renewed interest in the yellow metal. We are pleasantly surprised that Bridgewater Associates, the world’s largest hedge fund, has increased its SPDR Gold Trust ETF (GLD) holdings by a staggering 575% as of September 30, 2017, when compared to their previous disclosure three months ago as of June 30, 2017. Bridgewater purchased 3.32 million shares of GLD to bring its gold holdings to 3.89 million, representing 3.18% of its total portfolio (Bridgewater is now the 8th largest holder of GLD).
Bridgewater founder Ray Dalio has been on a recent media blitz advocating that investors have 5-10% of assets in gold as a hedge. We explore some of the specific risks that Dalio sees in our most recent infographic: How Billionaire Investors Hedge Against Geopolitical Black Swans.
We think that it is just a matter of time before investors begin to find it hard to ignore gold’s stealth bull market and react by increasing their allocations into this space accordingly.
Bridgewater Associates GLD Holdings
Source: Bridgewater Associates.
|1||Source: Bloomberg. The Gold spot price is generally used as the basis to determine the exact price to charge for a specific coin or bar.|
Past performance is no guarantee of future results. You cannot invest directly in an index. This content is intended solely for the use of Sprott Asset Management USA, Inc. for use with investors and interested parties. Investments, commentary and statements are unique and may not be reflective of investments and commentary in other strategies managed by Sprott Asset Management USA, Inc., Sprott Asset Management LP, Sprott Inc., or any other Sprott entity or affiliate. Opinions expressed in this commentary are those of the presenter and may vary widely from opinions of other Sprott affiliated Portfolio Managers or investment professionals.
This content may not be reproduced in any form, or referred to in any other publication, without acknowledgment that it was produced by Sprott Asset Management LP and a reference to sprott.com. The opinions, estimates and projections (“information”) contained within this content are solely those of Sprott Asset Management LP (“SAM LP”) and are subject to change without notice. SAM LP makes every effort to ensure that the information has been derived from sources believed to be reliable and accurate. However, SAM LP assumes no responsibility for any losses or damages, whether direct or indirect, which arise out of the use of this information. SAM LP is not under any obligation to update or keep current the information contained herein. The information should not be regarded by recipients as a substitute for the exercise of their own judgment. Please contact your own personal advisor on your particular circumstances. Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any investment funds managed by Sprott Asset Management LP. These views are not to be considered as investment advice nor should they be considered a recommendation to buy or sell. SAM LP and/or its affiliates may collectively beneficially own/control 1% or more of any class of the equity securities of the issuers mentioned in this report. SAM LP and/or its affiliates may hold short position in any class of the equity securities of the issuers mentioned in this report. During the preceding 12 months, SAM LP and/or its affiliates may have received remuneration other than normal course investment advisory or trade execution services from the issuers mentioned in this report.
SAM LP is the investment manager to the Sprott Physical Bullion Trusts (the “Trusts”). Important information about the Trusts, including the investment objectives and strategies, purchase options, applicable management fees, and expenses, is contained in the prospectus. Please read the document carefully before investing. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated. This communication does not constitute an offer to sell or solicitation to purchase securities of the Trusts.
The risks associated with investing in a Trust depend on the securities and assets in which the Trust invests, based upon the Trust’s particular objectives. There is no assurance that any Trust will achieve its investment objective, and its net asset value, yield and investment return will fluctuate from time to time with market conditions. There is no guarantee that the full amount of your original investment in a Trust will be returned to you. The Trusts are not insured by the Canada Deposit Insurance Corporation or any other government deposit insurer. Please read a Trust’s prospectus before investing.
The information contained herein does not constitute an offer or solicitation to anyone in the United States or in any other jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. Prospective investors who are not resident in Canada or the United States should contact their financial advisor to determine whether securities of the Funds may be lawfully sold in their jurisdiction.
The information provided is general in nature and is provided with the understanding that it may not be relied upon as, nor considered to be, the rendering or tax, legal, accounting or professional advice. Readers should consult with their own accountants and/or lawyers for advice on the specific circumstances before taking any action.
© 2020 Sprott Inc. All rights reserved.
You are now leaving Sprott.com and entering a linked website. Sprott has partnered with ALPS in offering Sprott ETFs. For fact sheets, marketing materials, prospectuses, performance, expense information and other details about the ETFs, you will be directed to the ALPS/Sprott website at SprottETFs.com.Continue to Sprott Exchange Traded Funds
You are now leaving Sprott.com and entering a linked website. Sprott Asset Management is a sub-advisor for several mutual funds on behalf of Ninepoint Partners. For details on these funds, you will be directed to the Ninepoint Partners website at ninepoint.com.Continue to Ninepoint Partners
You are now leaving sprott.com and linking to a third-party website. Sprott assumes no liability for the content of this linked site and the material it presents, including without limitation, the accuracy, subject matter, quality or timeliness of the content. The fact that this link has been provided does not constitute an endorsement, authorization, sponsorship by or affiliation with Sprott with respect to the linked site or the material.Continue