Investing in gold – the bull case
In this week’s video insight, we launch our two-part series on ‘investing in gold’. In this episode I explore commentary from a few prevalent gold bulls.
Ray Dalio, founder of one of the world’s largest hedge funds, Bridgewater Associates, emphasises that gold acts as a buffer against faltering fiat currency and therefore is a sturdy investment.
John Paulson, who established Paulson & Co and is most well-known for his success in betting against the subprime mortgage market during the 2008 financial crisis, also presents as a gold bull. During economic and geopolitical uncertainty, he sees gold as a critical asset.
Similarly, Peter Thiel, cofounder of Palantir, who in 2021 purchased US$50 million worth of gold bars, also sees gold as a shield against weakening fiat currency and black swan events.
Lastly, I delve into the opinion of James Rickards, one of the world’s most influential gold forecasters. He is wildly optimistic that gold prices will continue to climb due to increasing demand from central banks, declining trust in fiat currencies, and unstable geopolitical climates.
Join me next week for the final part of our ‘investing in gold’ series, where I explore the bearish perspective.
Transcript
Hi. I’m Roger Montgomery, and welcome to this week’s video insight.
Well, several billionaires – some of whom have successfully speculated on gold – believe gold’s advance isn’t over. Now, notice I said they’ve successfully ‘speculated’ rather than ‘invested’. I won’t say invested because gold provides no industrial service, and it doesn’t generate any income. It’s not much more than a bet on the fear of others increasing – and by the way – that includes the fear of monetary debasement, which can be fuelled by monetary inflation.
There are obviously many triggers for a rise in fear, and gold is the means through which those bets can be expressed.
Generally, the high-profile investors that believe gold will continue to rise, do so because of persistent economic and geopolitical uncertainties. Collectively, they see gold’s rise as being fuelled by a mix of inflation fears, a weakening U.S. dollar, geopolitical risks (for example, the U.S./China trade disputes), and strong demand from central banks and retail investors.
Forecasts like JPMorgan’s US$2,950 an ounce by Q4 2025, has already been usurped by gold’s recent ascent.
Ray Dalio, the now semi-retired founder of one of the world’s largest hedge funds, argues that with central banks globally maintaining loose monetary policies and inflation pressures persisting into 2025, gold retains purchasing power when fiat currencies falter. Emphasising gold’s role as a buffer against the erosion of fiat money’s value, he’s quoted as saying, “if you don’t own gold, you know neither history nor economics:”. Now – by the way, remember – Ray Dalio has probably forecast 15 of the last 2 crises.
John Paulson, Paulson & Co, is another hedge fund icon. Known for his 2008 financial crisis windfall, he’s also a gold bull. He sees gold as a critical asset amid economic uncertainty, such as lingering geopolitical tensions (including conflicts in Europe and the Middle East, and potential U.S. recession risks this year). And I guess those recession risks have increased. His significant holdings in physical gold and gold ETFs reflect his belief that it thrives when markets wobble, offering a safe haven as global growth remains uneven and unpredictable.
Peter Thiel, Palantir cofounder, is a contrarian venture capitalist who views gold as a shield against weakening fiat currencies, particularly the U.S. dollar. In 2021, Palantir bought US$50 million worth of gold bars to hedge against, “black swan events”. And Thiel’s argument is that gold’s value endures when trust in paper money erodes.
Finally, James Rickards. He’s a currency expert, author, and financial commentator, and is often cited as one of the most influential gold forecasters. While he’s not an investor managing billions of dollars like the others, nor is he a billionaire, Rickards has gained a strong reputation for his prescient calls on gold price movements. Indeed, his books such as The New Case for Gold, published in 2016, predicted gold’s rise as a safe haven asset amid global economic instability, currency devaluation, and central bank policies that align with gold’s ascent recently.
In a post on X back in late March, Rickards suggested that a higher gold price could benefit the U.S. Treasury if it were to revalue its gold reserves on the Federal Reserve’s books to generate cash without issuing debt. He stated, “if the U.S. Treasury plans to revalue U.S. gold on the Fed’s books to pull US$800 billion of cash out of thin air with no debt issuance, it might be convenient to have the price of gold go much higher to increase their cash haul”. In an interview on the Commodity Culture YouTube channel, Rickards reiterated his long-term view that gold could hit US$23,000 per ounce. Now I think that’s attention grabbing, but probably not right. He’s consistently urged investors to buy gold, arguing that its price will climb due to increasing demand from central banks, declining trust in fiat currencies, and heightened geopolitical risks (such as the U.S./China trade tensions under the Trump administration).
So, whether it’s persistent inflation risks, geopolitical tensions, currency concerns, or equity and bond market volatility – these investors’ rationales, if not timeless, align with today’s economic, financial, and geopolitical landscape. And, obviously, as the gold price rising reflects, currently, these views are in the limelight and being supported.
Now in our next episode of this two-part series, I’ll present the bear case or not the bull case. So, stay tuned. In the meantime, continue to follow us on Facebook and X.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
He is also author of best-selling investment guide-book for the stock market, Value.able – how to value the best stocks and buy them for less than they are worth.
Roger appears regularly on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
