If you are unfamiliar with Stan Druckenmiller, you can think of him as a rock star of the hedge fund world. He is worth $4.7 billion and, in his 30 years as a hedge fund investor, he never saw a negative return. So, if there is someone to watch in the market, it would be Druckenmiller.
Shortly following the U.S. presidential election Druckenmiller decided that gold was the right move and invested big.
Why Stan Druckenmiller Chose Gold
Up until the November 2016 presidential elections, Druckenmiller held gold in his portfolio, but on election night he decided he wouldn’t need the safe haven investment anymore. However, Donald Trump’s stance on tax reform and deregulation quickly reversed Druckenmiller’s perspective, leading the billionaire to buy back his gold position.
Druckenmiller attributes his return to the yellow metal to the actions of both the Federal Reserve in the U.S. as well as the European Central Bank. Since Druckenmiller reinvested in gold back in December, it has become clearer that both institutions are more hesitant to make the interest rate changes as they previously planned. This is a strong indicator that interest rates will not increase in the immediate future and, when they do increase, it will not have the significant impact the market was expecting.
Are Normal Investors Turning to Gold, Too?
For those of us who are not billionaire hedge fund geniuses, gold is still a strong option for February. Gold reached a high for 2017 this week by breaking through the previous resistance ceiling of $1220 dollars per ounce. The outlook for changes in gold or a significant down turn is not expected for the rest of the month, although day-to-day fluctuations are likely.
Investors should be equally concerned with fiscal policy coming from the Fed and other related institutions around the world, just as Stan Druckenmiller is. Further, any signs that a strengthening dollar will be here to stay is another key sign that gold values will fall. For the time being though, the uncertainty of coming policies and timing of expected actions, like rate increases from the Fed, is pushing many investors to safe havens like gold.
For the near future, gold seems to be on trend with periods of market uncertainty, but watching investing masterminds like Stan Druckenmiller can be a great way of tracking market expectations.
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