Gold in Portfolios: Billionaire Says It Should Be 30%

Gold’s price had crossed above 1,800 dollars – what many see as the “psychologically important” price – when I began this article. The upward move in gold was cued principally by something interesting in the news: that the relentless spread of the COVID delta variant was forcing the Federal Reserve to change its upcoming annual symposium in Jackson Hole, Wyoming, to a virtual event. Some observers are suggesting this development could give the Fed second thoughts about beginning to taper bond and mortgage-backed securities purchases (quantitative easing) sometime soon.¹

Talk about that kind of tapering off of quantitative easing picked up with the recent announcement that unemployment dropped to 5.4%, as well as the persistent belief among some that inflation will prove, in fact, to be “transitory” and not a chronic, long-term problem. To a group of Fed officials, these unemployment and inflation considerations strengthen the argument that it finally is time to move toward a tightening bias – and the first step to doing so is tapering.

But there are concerns now over just how impactful the delta variant could prove to the developing economic recovery. And the decision to make the Jackson Hole symposium virtual (for the second straight year), according to Reuters, “is the latest in a series of small but accumulating signs the new surge is having more of an impact than Fed officials anticipated.”²

Understandably, many gold owners are excited to see this development and it indeed is welcome news for those “gold bugs” hanging on every word that comes from the Federal Reserve about monetary policy. This can make sense for those who don’t embrace gold as a secular asset and prefer instead to see it merely as a source of price action to be nimbly played through any of its various paper-asset forms.

But even as a problematic delta variant may be good news for gold, I think focusing too closely on what amounts to the short-term price movements of gold is, to some degree, missing the point of owning the metal. This isn’t to say that news which can spark such movements isn’t relevant. It usually is and I will write about it often. But gold continues to be more often embraced as a core portfolio asset among big money managers and individuals with a truly significant net worth. In my opinion, that’s more important and revealing in the grand scheme of precious metals ownership.

As it turns out, many institutional asset managers and ultra-high-net-worth individuals are fans of gold for an array of reasons. Recently, one billionaire said to CNBC not only that he’s a long-time gold fan, but that savers should maintain a significant allocation to the metal because of the numerous and varied threats to global economic health. Gold may continue to be seen as an “alternative” asset by mainstream financial media, but astute retirement savers should, in my opinion, make note of the affection some of the world’s most prominent financial figures and money managers are now expressing for gold.

Sawiris: I Can “Go to Sleep at Night” with Gold Among My Holdings

Egyptian billionaire Naguib Sawiris notes that many precious metals experts think gold should make up 5% to 10% of one’s overall holdings. But he thinks the allocation should be much higher. Like 30%.

And to clarify, he doesn’t mean the allocation should be 30% right now and lower at other times. He thinks 30% is the number regardless of whatever else is going on in the world.

In a recent appearance on CNBC’s “Capital Connection,” Sawiris said he’s been as high as 50% in his gold allocation.³ Citing inflation as an important (in his opinion) reason for owning gold, the billionaire readily acknowledged gold is caught in a bit of a tug of war right now between inflation and the fear that interest rates might rise in the near term. But Sawiris went on to describe himself as a “long-term investor” in the metal, implying the importance of owning gold – which he calls “fundamental” – transcends any one reason for doing so.

On that note, Sawiris suggested the overall climate right now serves to validate that outlook. In addition to inflation, Sawiris cites overvalued markets, global instability, and the resurgence of COVID as significant sources of potentially gold-friendly turmoil in the worldwide economic environment. Sawiris told “Capital Connection” host Hadley Gamble that owning gold allows him “to go to sleep at night” unaffected by concerns over a potential stock market crash or by what sort of trouble the pandemic could cause.

Sawiris’s comments about what he sees as gold’s comprehensive risk-mitigation potential somewhat echo those made in January 2020 by Greg Jensen, CIO of world’s-largest-hedge-fund Bridgewater Associates. At the time, Jensen was projecting stronger gold going forward on the basis of what he felt would be a sizable uptick in global discord.

“There is so much boiling conflict,” he noted then.⁴ “People should be prepared for a much wider range of potentially more volatile set of circumstances than we are mostly accustomed to.”

Research: Gold Serves “Multiple Constructive Roles” in a Variety of Market Conditions

As I referenced toward the beginning of this piece, it seems as though many asset managers now are embracing gold not so much on any single basis exclusively but rather because of its capacity to act as a sort of calming influence on overall holdings. This general theme is prominent in results of a survey completed recently by Greenwich Associates and the World Gold Council:

Despite mounting fears of inflation, our data suggest that the expansion of institutional gold allocations should not be attributed to any single factor. In fact, when institutional investors are asked to name the primary role that gold plays in their portfolios, diversification tops inflation-hedging by a comfortable margin. Many investors also look to gold for long-term risk-adjusted return enhancement. In light of those findings, it’s likely that any plans to expand gold allocations reflect institutions’ broader view of gold as an asset that can serve multiple constructive roles in a portfolio across a broad spectrum of market conditions.⁵

This essentially is what Naguib Sawiris said to Hadley Gamble, just not in so many words. But make no mistake – the message of Naguib Sawiris, Greg Jensen and many institutional asset managers about the utility of gold as a core asset is as compelling as it is unified: In a world beset by a wide variety of challenges, gold potentially can be an effective way to help bring stability to one’s total savings. And some, like Sawiris, are so fond of gold’s capacity to do so that they believe it best to own the metal in larger quantities.

¹ Arundhati Sarkar, Reuters.com, “Gold rises above $1,800 as dollar dips on doubts Fed will taper soon” (August 23, 2021, accessed 8/26/21).

² Lindsay Dunsmuir, Reuters.com, “Delta variant, having put kibosh on Fed event, begins to menace recovery” (August 23, 2021, accessed 8/26/21).

³ Abigail Ng, CNBC.com, “Egyptian billionaire Naguib Sawiris says a quarter of a portfolio should be in gold” (August 10, 2021, accessed 8/26/21).

⁴ Yun Li, CNBC.com, “The world’s largest hedge fund sees gold rising 30% to $2,000: ‘There is so much boiling conflict’ (January 15, 2020, accessed 8/26/21).

⁵ Greenwich Associates and World Gold Council, Gold.org, “Rethink, Rebalance, Reset: Institutional Portfolio Strategies for the Post-Pandemic Period (July 8, 2021, accessed 8/26/21).