Gold
How Billionaire Investors Hedge Against Geopolitical Black Swans
Investors must always be comfortable with the idea that the market bears risk.
Sometimes this risk flies under the radar and isn’t as pronounced as it probably should be.
However, in other cases, the topic of risk can catapult to the forefront of discussion. There can be specific events or signals unfolding that give investors the jitters – and during these times, investors will make adjustments to their portfolios to avoid getting caught off guard.
How Billionaires are Hedging
In the following infographic from Sprott Physical Bullion Trusts, we explain the particular geopolitical risks that have the world’s most elite investors concerned today – and what moves they are making to protect themselves from black swans.
The world isn’t predictable at the best of times – but after unanticipated occurrences such as Brexit and the election of Trump in 2016, the geopolitical tea leaves are getting even more difficult to read.
The world is approaching a major inflection point and the intense amount of global angst we’re experiencing now stems from deep, structural forces that have been building over decades.
– Reva Goujon, VP Global Analysis of Stratfor
According to Reva Goujon, VP Global Analysis of Stratfor, we are experiencing the perfect storm of “-isms”: nationalism, nativism, protectionism, and isolationism.
As a result, the following potential geopolitical risks are at the top of the agenda for experts and top investors:
Domestic risks:
Unpredictability of the Trump administration, government inaction, a trade war with China, and NAFTA renegotiations
International risks:
Economic nationalism, further “exits” from the EU, Russia and China seeking to assert authority, terrorism, escalation of Middle East conflicts, and North Korea’s nuclear ambitions
Elite Investors Taking Action
With these risks perceived to be on the table, some of the world’s most elite investors like Ray Dalio and Warren Buffett are taking action. Here’s what they are up to:
Ray Dalio
Ray Dalio, the founder of the world’s largest hedge fund, Bridgewater Associates, had this to say:
When it comes to assessing political matters we are very humble.
-Ray Dalio, Aug 2017
Dalio’s advice: to stay liquid, stay diversified, and not be overly exposed to any particular economic outcomes. He also recommends a 5%-10% position in gold.
Warren Buffett
The Oracle of Omaha has a similar but very different perspective.
No one can tell you when these traumas will occur – not me, not Charlie, not economists, not the media.
– Warren Buffett, Feb 2017
With this in mind and with equities expensive, the seasoned value investor holds onto piles of cash to prepare for potential buying opportunities. Berkshire Hathaway now has $99.7 billion in undeployed cash, the most in the company’s history.
Bill Ackman
Billionaire hedge fund manager Bill Ackman took a position in “out of the money” call options on the VIX.
This will protect against stock market risk.
– Bill Ackman, Aug 2017
David Einhorn
The billionaire founder of Greenlight Capital says he is keeping gold as a top position.
The (Trump) administration comes with a high degree of uncertainty.
– David Einhorn, Feb 2017
Howard Marks
Lastly, the famous value investor Howard Marks warned his clients to move into lower-risk investments to protect against future losses.
The uncertainties are unusual in terms of number, scale and insolubility in areas including secular economic growth; the impact of central banks; interest rates and inflation; political dysfunction; geopolitical trouble spots; and the long-term impact of technology.
– Howard Marks, July 2017
Mining
Visualizing the New Era of Gold Mining
This infographic highlights the need for new gold mining projects and shows the next generation of America’s gold deposits.
Visualizing the New Era of Gold Mining
Between 2011 and 2020, the number of major gold discoveries fell by 70% relative to 2001-2010.
The lack of discoveries, alongside stagnating gold production, has cast a shadow of doubt on the future of gold supply.
This infographic sponsored by NOVAGOLD highlights the need for new gold mining projects with a focus on the company’s Donlin Gold project in Alaska.
The Current State of Gold Production
Between 2010 and 2019, gold production increased steadily, though this growth has stagnated over the past few years.
Year | Gold Production, tonnes | YoY % Change |
---|---|---|
2010 | 2,560 | - |
2011 | 2,660 | 3.9% |
2012 | 2,690 | 1.1% |
2013 | 2,800 | 4.1% |
2014 | 2,990 | 6.8% |
2015 | 3,100 | 3.7% |
2016 | 3,110 | 0.3% |
2017 | 3,230 | 3.9% |
2018 | 3,300 | 2.2% |
2019 | 3,300 | 0.0% |
2020 | 3,030 | -8.2% |
2021 | 3,090 | 2.0% |
2022 | 3,100 | 0.3% |
Along with a small decrease in gold production in 2020, there were no new major gold discoveries in 2021.
The fall in production and long-term lack of gold discoveries point towards a possible imbalance in gold supply and demand. This calls for the introduction of new gold development projects that can fill the supply-demand gap in the future.
Sustaining Supply: Gold for the Future
Jurisdictions play an important role when looking for projects that could sustain gold production well into the future.
From political stability to trustworthy legal systems, the characteristics of a jurisdiction can make or break mining projects. Amid ongoing market uncertainty, political turmoil, and resource nationalism, projects in safe jurisdictions offer a better investment opportunity for investors and mining companies.
Today, 10 of the top 15 mining jurisdictions for investment are located in North America, according to the Fraser Institute report published in 2023.
A Golden Opportunity
Located in Alaska, one of the world’s safest mining jurisdictions, NOVAGOLD’s 50% owned Donlin Gold project has the highest average grade of gold among major development projects in the Americas. For every tonne of ore, Donlin Gold offers 2.24 grams of gold, which is more than twice the global average grade of 1.04g/t.
Additionally, Donlin Gold is the second-largest gold-focused development project in the Americas, with over 39 million ounces of gold in M&I resources inclusive of reserves.
NOVAGOLD is focused on the Donlin Gold project in equal partnership with Barrick Gold.
Learn more about Donlin Gold .
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