Many investment advisers take a dim view of investing in gold. They’ll try to push their clients into stocks and bonds, CDs, and various other financial investments. If gold even gets a mention, it might get a recommendation to make up about 3-5% of an investor’s portfolio. Even billionaires like Warren Buffet denigrate the importance of gold, which is why hearing about the super-rich investing in gold always makes the news.
Egyptian billionaire Naguib Sawiris made headlines earlier this month for putting half of his net worth into gold. Just the size of that investment is enough to make headlines for any billionaire, since the value of most billionaires is tied up in stock that can’t easily be liquidated. Sawiris, on the other hand, now has half his net worth invested in something tangible.
Furthermore, his investment is far larger both in terms of amount and percentage than what anyone would expect from a gold investor. With an estimated net worth of $5.7 billion, Sawiris has invested nearly $3 billion in gold. That’s over 2 million ounces, or around 62 metric tons. If Sawiris were a country, he would be the 45th-largest holder of gold, just behind Egypt, Brazil, Denmark, and Pakistan, and just ahead of Argentina, Finland, Belarus, and Bolivia.
So why is Sawiris investing such a large part of his fortune into gold? He believes that gold will rise to $1800 per ounce, which would be a nearly 40% gain from current levels. He also believes that stocks are currently overvalued and about to crash. He certainly isn’t alone in that assessment, as stocks having gained over 60% in value in the past two years is widely judged to be unsustainable. And with a variety of economic and political headwinds on the horizon, expectations of a stock market crash are becoming more and more widespread.
Sawiris’ bet isn’t terribly radical, either. Gold gained 13% in value in 2017 even in the face of a hot stock market, and traditionally does even better when stock markets perform poorly. And since gold’s all-time high price was over $1900, a rise to $1800 would just be recovering lost ground, not breaking new ground.
Perhaps Sawiris looked at the performance of gold versus stocks too, as higher than normal percentages of gold in investor portfolios both provided asset protection during the 2008 financial crisis and continue to protect investor assets today. Investors who had moved 30% of their assets into gold before the 2008 financial crisis would have seen their portfolios 60% more valuable during the crisis than those who stayed in stocks, and those portfolios would still be more valuable today than an all-stock portfolio. That’s the power that gold has to protect investors.
While it remains to be seen whether other large investors will follow Sawiris’ lead, especially to the extent that he has, it’s nonetheless a positive sign for gold’s outlook. Sawiris certainly won’t lose any money with his investment, since gold is expected to continue its gains this year as economic and geopolitical turmoil threaten world markets. And he could provide ordinary investors with the inspiration they need to take the steps to protect their own retirement savings by investing in gold.
This article was originally posted on Goldco.
