By historical standards, gold is still under-owned; global investors now have about 3% of their assets in gold, which is half the size of allocations in 1980, observes Eddy Elfenbein, editor of Growth Stock Advisor.
Meanwhile, gold-backed exchange-traded funds (ETFs) represent only 2.5% of global ETF holdings. This compares with 10% back in 2011 when gold hit its prior peak.
Some of the world's most prominent investors have turned into gold supporters. In a letter to investors in May, Paul Tudor Jones of Tudor Investment Corp said a simple ratio tracking the value of gold above the ground to global money supply suggests its price could reach $2,400 an ounce.
The reality is that there is a long and fast-growing list of many of the world’s wealthiest investors who are eagerly buying gold and gold stocks right now. This list includes such legendary billionaires as:
- Ray Dalio, who runs the world’s biggest hedge fund, Bridgewater
- John Paulson, who earned billions shorting sub-prime during the financial crisis
- Ken Griffin, founder of hedge fund Citadel
- David Einhorn of hedge fund Greenlight Capital
- Former real estate mogul Sam Zell of Equity Group Investments
And then there is Warren Buffett. In August, Buffett's Berkshire Hathaway (BRK.B) announced it had purchased a $565 million position in Barrick Gold (GOLD).
Why did he do this after scorning gold for so many years? I think Buffett's change of heart was due to the combination of our government borrowing heavily and the Federal Reserve printing a seemingly infinite amount of money.
These policies — which are weakening the dollar — are not likely to change for a very long time, if ever. They will continue to be the main driver behind gold’s rise to new all-time highs.
Another factor at play here is that Buffett likes companies that pay rising dividends. And Barrick fits that description. In fact, Barrick has been growing its dividend over the past 10 years.
In August, the company hiked its dividend by 14% to $0.08 per share. That stands in stark contrast to hundreds of other companies that have had to suspend or reduce their payouts due to the pandemic.
Barrick is well positioned after its 2019 merger with the major African gold producer, Randgold. It has the greatest concentration of Tier 1 gold assets in the industry, so let's follow Buffett and buy the second-biggest gold producer in the world. Purchase the shares at any price up to $37 a share.
