Can’t decide between gold or Bitcoin? Why not the two of them?
Paul Tudor Jones is very bullish on Bitcoin right now and could give crypto the same 5% weighting as gold, commodities and cash.
Two years ago this month, the billionaire hedge fund manager said that gold was his favorite business over the next 12-24 months due to geopolitical disruptions, among other factors. The yellow metal “has it all,” he told Bloomberg.
It was a good call. Over the next 12 months, the price of gold rose from around $ 1,330 an ounce to $ 1,730, and in August 2020, it finally hit its all-time high of $ 2,073, an increase by 55% since the day Jones announced his optimism.
This week he made a similar appeal in response to soaring inflation, saying he would go ‘all-in’ on not only gold but also crypto and commodities if the Federal Reserve refuses to intervene and control the rise in consumer prices. (For the record, that’s exactly what the Fed did, leaving rates at all-time lows for now.)
“Yes [the Fed governors]say, “We are on the right track, things are going well”, then I would get into inflation trading. I would probably buy commodities, crypto, gold, ”Jones told CNBC.
He added that he wanted “5% in gold, 5% in Bitcoin, 5% in cash, 5% in commodities”.
Jones’ comments come just weeks after fellow billionaire hedge fund guru Ray Dalio surprised investors by saying he rather own Bitcoin than government bonds. Investing in bonds has become “stupid,” he said, as yields are currently below the rate of inflation.
Like Jones, Dalio is traditionally a fan of gold, and at Bridgewater’s last filing, his fund had a $ 277 million position in SPDR Gold Shares (GLD) and a $ 143 million position in iShares Gold. Trust (IAU). The fund also held relatively small positions in a number of companies involved in the mining of precious metals, including Barrick Gold, Newmont, Agnico-Eagle Mines and Wheaton Precious Metals.
With inflation on the rise, investors may not be able to afford to avoid gold and bitcoin
I think Paul Tudor Jones and Ray Dalio are correct in allocating funds to gold as well as its digital cousin Bitcoin. Some investors try to make it a debate, but in general I think there is enough room in most portfolios for both assets, let alone the exposure to commodities.
I’ll show you why in a moment, but for now there should be no doubt that inflation is here, transient or not. A basket of commodities, including gold, is on the verge of touching and surpassing its all-time high of 2011, as shortages, labor shortages and a growing order book push prices up by everything from aluminum to wheat.
As a result, prices received by producers for finished goods and services increased at the fastest rate ever recorded last month. The final demand index rose 6.6% in May, the largest increase on record since 12-month data collection began in late 2010.
Seeking refuge therefore makes a lot of sense to me right now. Stocks have so far ignored higher inflation, but it’s important to recognize that rising consumer prices are often a self-fulfilling prophecy, regardless of what the Fed does. Many investors may not be able to afford to avoid gold and Bitcoin.
Beat Tech Gold and Crypto Stocks
While inflation wasn’t that much of a concern, gold and Bitcoin have performed well enough in recent months to warrant having them in your wallet.
In fact, according to a recent report by Bloomberg commodities strategist Mike McGlone, a simple 80/20 index of metals and cryptos has beaten the tech-heavy Nasdaq-100 since August 2017, when the Bloomberg Galaxy Crypto Index broke. been launched.
When combined with a 20% weighting with the Bloomberg All Metals Index, Mike’s 80/20 Metals-Crypto Index was very competitive and ended the period above the Nasdaq-100. In addition, it did so with lower volatility.
“Volatility is relative, and when combined with gold, Bitcoin has been less risky than the S&P 500, which should support the quasi-money outperformance in 2021,” Mike writes.
This is not to say that Bitcoin is risk free. Far from there. But when used cautiously with gold, it could help protect investors from potentially unstable market volatility triggered by higher than expected inflation.
Originally published by American funds, 06/17/21
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The Commodity Research Bureau (CRB) index acts as a representative indicator of today’s global commodity markets. The CRB measures the aggregate price direction of various commodity sectors and is designed to isolate and reveal directional price movement across commodity trade. The Producer Price Index (PMI) for final demand measures the change in prices received by domestic producers for goods, services and construction sold for personal consumption, capital investment, government and l ‘export. The Nasdaq 100 Index is a basket of the 100 largest and most actively traded US companies on the Nasdaq Stock Exchange. Bloomberg Galaxy Crypto Index (BGCI) is designed to measure the performance of the largest cryptocurrencies traded in USD. The S&P 500 is a stock market index that tracks the stocks of 500 large-cap US companies.
Holdings may change daily. Holdings are reported at the end of the most recent quarter. The following securities mentioned in the article were held by one or more accounts managed by US Global Investors as of 03/31/2021: Barrick Gold Corp., Newmont Corp., Wheaton Precious Metals Corp.