World's Billionaire Investors Buy #Gold

"They want to make money – but they also want to execute on strategies that will protect their wealth and build robust portfolios that can withstand any type of macro event."

http://www.visualcapitalist.com/billionaire-investors-precious-metals/
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Why the World's Billionaire Investors Buy Precious Metals

Jeff Desjardinson June 7, 2017 at 12:27 pm

There are always lessons that can be learned from the "smart money".

Unlike regular investors, billionaire money managers like Ray Dalio and Stan Druckenmiller are professional investors. They have entire institutional teams at their disposal, dive deep into the nuances and complexities of the market, and spend every waking moment of their lives thinking about how to get more from their investments. 

They want to make money – but they also want to execute on strategies that will protect their wealth and build robust portfolios that can withstand any type of macro event. 

Turning to Gold

In recent months, some of these elite investors have turned to precious metals like gold as a part of their overall investment strategies.

In the following infographic from Sprott Physical Bullion Trusts, we explain why these investors are adding precious metals to their portfolios, the underlying tactics, and the best quotes each investor has on assessing today's market

Why are these billionaires buying precious metals?

Their cited reasons can basically be summed up with six categories: wealth preservation, store of value, inflation hedge, portfolio diversification, future upside, and investment fundamentals.

What Billionaire Investors are Doing

1. Lord Jacob Rothschild
In late summer 2016, Rothschild announced changes to the RIT Partners portfolio because he was worried about very low interest rates, negative yields, and quantitative easing, saying they are part of the "greatest monetary experiment in monetary policy in the history of the world".

His solution? Buy gold to help preserve wealth, and as a store of value for the future.

2. David Einhorn
Einhorn has a similar assessment. He believes that monetary policy is becoming increasingly adventurous, and that this – along with the policies of the Trump administration – will eventually lead to large amounts of inflation.

In February 2017, he shorted sovereigns, and bought gold.

3. Ray Dalio
Ray Dalio is the founder of the world's top hedge fund, Bridgewater Associates, but he's also no stranger to gold.

If you don't own gold, you know neither history nor economics.

– Ray Dalio, Bridgewater Associates

More recently, in 2016, Dalio is quoted as telling investors to own a well-diversified portfolio that is 5-10% gold.

4. Stanley Druckenmiller
Druckenmiller, some people argue, is the best money manager of all time.

Lately, he's placed his bets on gold as well, but for different reasons than the above managers. Druckenmiller has always placed big trades with lots of conviction, and in February 2017 he put his money in gold because "no country wants its currency to strengthen".

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Jeff Desjardins is a founder and editor of Visual Capitalist, a media website that creates and curates visual content on investing and business.

#SouthAfrica - New 30% #BEE More cost and less productivity if implemented New black empowerment rules

#AngloGold Ashanti $AU  & #GoldFields $GFI are suffering 

From @Scotiabank 

 "South Africa: New Mining Charter More Unfavorable Than Expected (For AU & GFI)…:  The South African Department of Mineral Resources released its Reviewed Mining Charter this morning, which takes immediate effect. The final version of the Charter includes more stringent requirements for miners than both the Mining Charter previously in effect and the draft revised Mining Charter that was released last year. The South African Chamber of Mines, which represents the vast majority of the miners, characterized the new Charter as being unilaterally imposed on them and is commencing legal actions to suspend the implementation of the Charter. Scotiabank Senior Precious Metals Analyst  flagging the key details and impact of the new charter below.

 1)     Requirements of Revised Charter. i) Black ownership requirement: increased to 30% from 26%, and "once-empowered, always-empowered" concept removed; for green fields projects, the minimum is 50%+1 ii) Procurement: 70% of mining goods/80% of services must be sourced from black economic empowerment (BEE) companies and mineral samples must be processed in-country; additionally locally sourced mining goods must be manufactured in-country iii) Black employment requirement: certain minimum percentages of board members and employees at each organization level must be Black Persons, a portion of which must also be female iv) New 1% BEE Royalty: The 30% BEE owners are to receive a priority 1% gross royalty (not included in the draft).

 2)     Removal of "once-empowered, always-empowered" concept. In prior versions of the Charter, the BEE ownership requirements were only required to be met at one point in time (i.e. BEEs entities/people could sell their interests and use the proceeds as they pleased). Under the new Charter, a 30% minimum BEE ownership is required in perpetuity.

 3)     Miners' response: commencing legal action to suspend implementation of Revised Charter. The Chamber of Mines says that unlike for previous iterations of the Mining Charter, it was not substantively consulted in this process and the current version is unworkable. As a result, it plans to immediately commence legal proceedings to delay or reduce the impact of the new Charter, including seeking to suspend implementation of the entire Charter, pending court review of the requirements, and to challenge the removal of the "once-empowered, always-empowered" concept.

 4)     Impact to AngloGold Ashanti and Gold Fields: 26% of AngloGold Ashanti's (AU-US, SP, US$13.50, Tanya Jakusconek) and Gold Fields' (GFI-US, SP, US$4.00, Tanya Jakusconek) NAV are each related to South African operations. If implemented as-is, the most obvious impacts of to the companies are reduced ownership of and higher costs at their respective operations. At GFI, 10% of its South African operations is already owned by a BEE company, implying that an additional 20% could be required to be given to BEE groups (~$0.30/sh impact). For AU, Tanya understands that BEE groups do not currently have any direct ownership so they could be required to give 30% to BEE groups (~$1/sh). The more stringent procurement requirements in particular could cause costs to increase significant and could impact productivity if equipment selection is reduced".

 

#Palladium - Hitting 16-year highs - +40% ytd

"near-term pull-back likely before further gains in late 2017"

Below is a comment on Palladium from Metals Focus, June 13, 2017: 

Attachment 1 shows the long term chart of Palladium and attachment 4 the 1-year chart. Attachment 5 is the Point&Figure chart which shows how volatile this precious metal is.

Palladium has posted a remarkable rally over the last three weeks, hitting a 16-year high of $928 on 9th June, which represents a 23% increase from its recent trough in April. Moreover, with platinum's lacklustre price performance over the same period, the spread between the two fell to as low as just above $30 last Friday. Even though the rally soon lost momentum, palladium has so far managed to consolidate in the high $800s, making it by far the strongest performer in the precious metals complex.

Palladium's robust gains year-to-date have been assisted by a severe squeeze in physical liquidity in Western terminal markets. In spite of sizeable above-ground stocks (estimated at 15.3 Moz at end- 2016), signs of market tightness have emerged since late 2016; the market has seen moves into backwardation and securing metal in the spot market has been challenging. More recently, this backwardation in the Nymex futures has deepened, while inventories at the exchange now amount to a mere 42koz, their lowest level since 2003.

We believe that the biggest reason behind such tightness has been strong speculative demand for physical metal from Asian entities. Feedback from our field trips indicates that these heavy purchases have been fuelled by bullish price expectations as well as confidence that palladium fabrication demand will continue to strengthen in the coming years. This in turn has resulted in a major shift of stocks out of Western terminal markets.

Meanwhile, as palladium prices broke out above technical resistance levels, speculative interest from short-term investors seems to have picked up notably. As of 6th June, net managed money positions in Nymex futures stood at 1.18Moz, almost double their end-2016 figure and only a fraction below the peak recorded in August 2014 (when palladium last surpassed $900).

Looking ahead, as the palladium market is forecast to remain in a sizeable deficit in the foreseeable future, further price strength seems still justified. However, given the scale of the recent rally, we would caution that the white metal is vulnerable to heavy investor profit taking. After all, despite an apparent lack of short-term physical liquidity, palladium bullion stockpiles remain ample at present. More importantly, growth in global vehicle production is likely to slow down this year. Although the notable weakness in key car markets such as the US and China in recent months has so far little dampened investor confidence in palladium, this poses a downside risk to prices.

Ongoing macroeconomic uncertainties also cannot be ignored, which could weigh on investor sentiment towards industrial metals in general. Already in the US, expectations about economic growth have been scaled back, amid growing political turmoil and disappointing macroeconomic data. Related to this, we retain the view that a correction in US equities is looking increasingly likely.

Against this backdrop, we believe that $928 may well represent the peak for 2017. In the near term, the recent pull-back in prices may well continue, before renewed strength emerges later in the year.

Moreover, given that the palladium market is far smaller and hence less liquid, this renewed strength is likely to be accompanied by continued high price volatility".