Call it the gold rush or the gold bug, but one of the world’s oldest investments is making a name for itself as a safe haven in the financial storm. Part of investor portfolios since the dawn of our modern financial time, the precious metal was never the most exciting weapon in a hotshot investor’s arsenal, but current macroeconomic conditions have created a buzz around this previously pedestrian commodity. While gold is touted as a necessary base in any portfolio, current market conditions have shone a much more speculative light on the portfolio staple.
In September, famed market shaman and investor George Soros called gold “the only actual bull market.” Soros’ hedge fund, Soros Fund Management LLC, at the end of the second quarter was the third largest shareholder in SPDR Gold Trust, holding 5.24 million shares. On October 26 Soros’ share was worth $685.7 million and constituted 1.2 percent of the fund.
Also as of October 26, United States gold futures stood at $1,340 and spot gold just a few cents less than that. This represents a gain of 22 percent this year and a record-breaking streak of annual gains since 1920.
A customizable commodity
The many ways to invest in gold can be customized to fit individual investor preferences and risk appetites. Buying physical gold is the most conservative option and is recommended as a hedge against any future financial or currency road bumps. Risk takers and market manipulators may also choose to invest in gold futures through exchange traded funds (ETFs) — such as Soros’ favorite APDR Gold Trust — which offer higher leverage and higher return but also present higher risk.
Many mangers are also advising clients to invest in mining or distribution outlets through equity investments as a middle ground. Soros’ fund also has $250 million in equity investments in gold and minerals mining.
The gains in gold have been caused by both massive quantitative easing in the United States and an erosion of trust in Western currencies. “As long as the US keeps on debasing its currency and the dollar is weakening, gold will keep going up,” said Mahmoud Ezzedine, head of private banking at Fidus.
But some say that the gold rush may be coming to an end shortly. “When taxi drivers tell you that you can make a lot of money in gold, it only means the beginning of the end of this trend,” said Nael Raad, deputy general manager of Ahli Investment Group Lebanon.
Soros has stated that he will ride the gold wave for a bit longer before cashing in, but many local wealth managers say that the time for speculation is over, as the quick appreciation suggests that a correction is coming soon.
At this point it comes down to a hunch as to when what has gone up will inevitably come back down. Toufic Aouad, general manger of Audi Saradar Private Bank, predicts that gold will rise to $1,500 before it starts to drop, but is not necessarily recommending to buy.