In a current environment of recovery of the global economy, with the threat of rising inflation, spurred on by the multi-million dollar support plans launched in the US by the Federal Reserve, investors are increasingly taking safe haven assets such as metals into account beautiful. In this same week, two large international investors have agreed to recommend physical gold as a means of protection against inflation, rejecting other options such as bitcoin.
The price of gold has risen in recent days and, at the time of writing this post, it was already above $1,816.50 an ounce , its highest level in the last month.
In a global economic environment marked by uncertainty about the recovery, geopolitical instability surrounding the conflict in Afghanistan and fear of a significant rise in inflation, precious metals once again appear as a suitable option to protect investors’ assets.
It is no coincidence that, in recent days, large international investors have advised increasing exposure to the precious metal to face the risk represented by rising inflation.
Möbius: 10% of the portfolio in gold
This is the case of Mark Möbius , an investor of German origin who led the investment firm Templeton ; he was the first to bet on the potential of developing countries, such as Chile and Brazil; he developed the stock markets in Latin America and Asia; and became an adviser to the World Bank and the Asian Development Bank .
In recent statements to the Bloomberg news agency , the veteran investor has opted for gold, preferentially physical, as the means of dealing with inflation and the monetary devaluation that it brings with it.
According to Mobius:
“The global currency devaluation is going to be very significant over the next year, given the incredible amount of money that has been printed . “
The investor believes that the unprecedented economic stimuli that have been put into operation since the beginning of the covid-19 pandemic are going to cause the devaluation of a good number of international currencies in the future.
In the United States alone, trillions of dollars have been invested in these stimulus programs that seek to accelerate economic growth, affected by the pandemic. The programs include the repurchase of treasury bonds and direct aid to consumers.
To counteract this currency devaluation, Möbius advises investors to purchase physical gold instead of the popular gold ETFs:
“ 10% of the investment portfolio should be in physical gold . It is very useful to have physical gold that can be accessed immediately, without the danger of the government confiscating it . ”
Physical gold has multiple advantages over so-called ‘paper gold’ : it has no counterparty risk, is not linked to any entity and has immediate liquidity at any time and place, even in the event of a natural catastrophe or systemic financial crisis.
Paulson: gold, better than bitcoin
The second major investor to have bet on gold in recent days is John Paulson , founder of the hedge fund Paulson & Co , which became famous in 2007 for betting against US subprime mortgage-backed securities. , a maneuver with which he earned more than 4,000 million dollars.
This financier has always been a staunch supporter of gold, which his hedge fund turned to as protection before the 2008 financial crisis.
According to Paulson, also interviewed by Bloomberg , the stars are realigning in favor of the precious metal, which is going to benefit from higher-than-expected inflation due to the huge supply of money pushed from the Federal Reserve to combat the financial effects of the pandemic.
For the US investor, now is the time to buy gold, as the precious metal “ revaluates very positively in times of rising inflation” .
In fact, Paulson has recalled what happened in the 1970s, when the price registered a ‘parabolic’ rise, caused by double-digit inflation.
In those years, the US CPI soared from 2.7% in June 1972 to a record of 14.8% in March 1980. For its part, gold went from $38 an ounce in August 1972 to nothing less than 850 dollars in the early 1980s.
Paulson believes that this situation could have parallels with the current one, and that gold will also benefit from its supply/demand situation, due to the “limited amount of investment gold” that exists in the market.
In addition, the American investor confesses that “I am not a believer in cryptocurrencies” , whose market is the closest thing to “a bubble” and whose value will end up being zero.
Even though the bitcoin supply is limited to 21 million units, Paulson considers this to be “a limited supply of nothing” . In his opinion, as long as the demand exceeds the supply, the price will go up; the problem is that when demand falls, the price will fall with it.
“None of the cryptocurrencies have intrinsic value, except for the fact that there is a limited amount ,” Paulson noted in the interview.
In any case, the example of large investors is very clear: faced with the threat of inflation and currency devaluation, the best way to protect yourself is by acquiring physical gold .