Is Stanley Druckenmiller Bullish on Gold?

Why Many Hedge Fund Managers Are Turning to Gold

(Continued from Prior Part)

Druckenmiller has 30% in gold

Stanley Druckenmiller, an American hedge fund manager, was the chair of former Duquesne Capital, which he founded in 1981. He left the fund in 2010, as he felt he was unable to deliver high returns to his clients. During December 2015, the Duquesne Family Office, managed by Druckenmiller, reported $977 million of assets. $292 million, or ~29.9% of that, was invested in the SPDR Gold Trust (GLD).

Druckenmiller seems to believe that central banks around the globe may not be fully in control of their respective monetary policies, and with such massive shares in gold, he may rightly be looking at its haven appeal. Druckenmiller told Sohn Investment Conference attendees to sell their equity holdings. He remained skeptical about the current financial market scenario due to the Federal Reserve’s easy monetary policy. He also mentioned his concerns over the negative outcome of the Chinese and other Asian markets.

SPX and gold

While Druckenmiller didn’t explicitly give an investment recommendation, he did strongly hint at buying gold. For investment in gold, many investors often prefer mining-based funds like the VanEck Vectors Gold Miners (GDX) and the iShares MSCI Global Gold Min (RING). These two funds rose 71.7% and 86%, respectively.

The above chart shows the performance of gold prices as compared to the S&P Index. Market unrest during the beginning of 2016 has spread globally. Equities plunged during the same timeframe while gold emerged as a superhero.

Druckenmiller likely presumes that the bull market in stocks was exhausted, and he probably weighed the ramifications of unprecedented monetary easing on inflation. Thus, he supported gold.

Browse this series on Market Realist:

• Part 1 - Gold and Silver Have Emerged as Superheroes in 2016

• Part 2 - How Central Banks Are Affecting Gold Movement

• Part 3 - Chinese Gold Reserves Surged in April