Keeping most of your wealth in the stock market might not be a good idea, according to one Egyptian billionaire, who invested half of his $5.7 billion net worth into gold believing that prices could rise to $1,800 on “overvalued” stock market.
Capital Economics said on Monday that investors might see $1,400 an ounce gold only after the Federal Reserve wraps up monetary policy tightening in 2020.
And Coutts Investments went as far as to say that holding gold is “uneconomic” in the current financial environment.
“Gold is … a hedge against both equity market volatility and inflation. While inflation and volatility are rising we believe that the prospect for risk assets is positive, and inflation and interest rates are likely to remain at levels where holding gold is uneconomic for now,” Coutts said in a note published on Monday.
“The stock market is overvalued and I feel that another crash will happen. That is why 50 percent of my net worth is in gold. It’s a very high percentage and it was not half of my net worth when I started,” Naguib Sawiris told Bloomberg in an interview on Monday. “[Gold prices] should go back to five years ago, [when they were] at $1,700-$1,800.”
What made gold the right investment for Sawiris was its safety amid rising geopolitical risks as well as its unyielding demand.
“You have India and China and they are big consumers and they will not stop to consume. And people tend to go to gold when there are crises and we are full of crises — look at the Middle East and Mr. Trump isn’t helping,” Sawiris explained. “I am one of the largest investors in gold mining in the world right now. I had to convince my mom in the beginning. But, it has been a very good investment for me.”
But, not everyone is optimistic about gold right now, as the metal struggles to stay above $1,300.
touched 4.5-month lows on Tuesday and were last trading at $1,305.70, down 0.08% on the day.
The U.S. dollar has been the primary downward driver for the precious metals, said Kitco’s senior technical analyst Jim Wyckoff.
“The recent solid rally in the U.S. dollar index, which hit a four-month high today, continues to squelch buyer interest in the precious metals markets. Chart-based selling has also kicked in for gold and silver recently, as their near-term technical postures have deteriorated,” Wyckoff wrote in his PM Roundup.
Aside from gold, Sawiris is very interested in the relationship between the U.S. and North Korea, as he has a lot of interest in the secluded country after founding North Korea’s first telecom operator, Koryolink.
“I have put a lot of money and built a hotel and did a lot of good stuff there,” said Sawiris. “I am taking all the hits, I am being paid in a currency that doesn’t get exchanged very easily.”
So, a peace deal between the U.S. and North Korea would greatly benefit Sawiris’ interests.
“I know these North Korean people. They are very proud, they will not yield under threat and bullying. You just smile and talk and sit down and they will come through,” he said.
Sawiris is known for his investments in the telecom, finance and mining sectors around the world.