You might have read a few stories or heard on the news that billionaires have invested substantial sums in gold. At different times, wealthy individuals have spoken about their stance on precious metals. Some provide tips and recommend them, while others have dismissed them, only to change their approach later.
In this guide, we look at why billionaires choose to invest in gold. Besides exploring their reasons, we find out more about who holds gold assets and the circumstances around the purchases. Finally, we’ll review whether every investor should follow in the footsteps of the ultra-wealthy.
Understanding the Value of Physical Assets
Billionaires often like to keep their assets where they can see them, access them, admire and use them. Physical assets fit the bill in providing status and something that’s in their possession and control. Gold isn’t the only tangible investment that’s popular with the ultra-wealthy. They often choose property, art, and land alongside precious metals.
Being a billionaire puts you in a better position to invest in physical assets for two reasons. First, if you have wealth spread across many investments and accounts, you won’t need to worry too much about liquidity, as you’ll have a substantial fund you can access. Second, tangible investments often have a higher price point than financial ones, but that’s not a barrier for the wealthy.
It’s worth keeping in mind that silver and gold are more accessible than art and property, though.
Wealth Protection
Gold is seen as a safe haven when it comes to investing. It’s the top choice for hedging against losses. Since billionaires have a lot to lose, they make it a priority to hold on to their wealth. As investors, they’ll have stocks and bonds in their portfolios.
When financial assets decrease in value, gold usually goes up. It happens in times of inflation, when the economy isn’t stable and during geopolitical turbulence. While gold doesn’t provide fast growth, billionaires recognize its power to provide long-term value. As a long-standing commodity of value, gold has weathered many financial crises and proven to come out just as valuable, if not more so.
Not Trusting Banks
Wealthy people invest in gold because of how they feel and what they know about banks and financial institutions. Some don’t trust banks to hold their assets securely. Others don’t want banks making money off of their assets, and there are some who fear having their money seized.
It’s not just the banks that are the issue. Billionaires see governments, the Federal Reserve and other institutions making decisions that devalue the dollar. For this reason, they don’t want their fortune to be eroded based on policy decisions. Gold relies on supply and demand, mining, and being viewed as a precious metal. Organizations can’t change its value the way they can with currencies.
Billionaires That Have Invested in Gold
While it doesn’t automatically follow, it’s safe to assume that most billionaires are good investors. If they don’t start that way, they definitely improve so that they can maintain and grow their fortunes.
Some of them have gained knowledge from working in the industry. Whether they’re financial gurus or not, they’ll have a team of people helping them make the best financial decisions. That includes deciding to invest in gold. Let’s take a look at some wealthy individuals that own gold, what they bought and any tips they provided.
Ray Dalio
Ray Dalio founded Bridgewater Associates. It’s the world’s largest hedge fund that manages $140 billion. His net worth is estimated at $19.1 billion. Like Bill Gates and Warren Buffett, he has pledged to donate more than half of his wealth to charities over his lifetime. Dalio has already given more than $850 to good causes and has set up his own foundation.
In 2020, his hedge fund held 20% in gold. The same year, Dalio advised against holding cash in a speech at the World Economic Forum. His move toward gold shows that he perceives that the market is risky.
Warren Buffett
Warren Buffett is the epitome of a successful investor, with an estimated net worth of $110.4 billion. He’s a philanthropist and the chairman of Berkshire Hathaway.
He famously described gold in a negative way, referring to it as an investment that would only show a profit in a few years if people were more afraid. He admitted that it was a pretty good option from time to time, but that gold itself doesn’t produce anything.
His 2020 investment of more than $500 million in the world’s largest mining company, Barrick Gold, shocked Wall Street. He’d changed his stance on gold while reducing stakes in financial services companies.
Naguib Sawiris
Egyptian billionaire Naguib Sawiris has an estimated net worth of $3.3 billion. The businessman comes from a wealthy family and has increased his wealth through his telecommunications and investment companies. He also helped start The Free Egyptians, a political party.
He’s been upfront about his reasons for buying gold, indicating that it’s a form of protection against crises. In 2018, he invested half of his net worth in the precious metal. He said that he anticipated an increase in gold prices fur to demand, which was also balanced by a view that overvalued stock markets would crash.
So far, he’s certainly seen a good return. The price was $1,300/oz when he bought it, and it’s currently 1,922/oz.
Should You Take A Tip From Wealthy Investors?
It’s fair to say that wealthy investors are in unique positions. They have the capital to spare and gold is just one part of their extensive portfolios. However, that doesn’t mean that the logic and approach don’t apply to regular investors. We can take their knowledge and apply it to our own circumstances.
While the amounts and percentages might vary, holding gold still makes sense. It’s best used to diversify a portfolio and to hedge against riskier options if you already have some wealth. If the market looks uncertain, gold is a reliable choice.
