When Big Money Enters

Two of Wall Street’s bigger players announced strategic moves into the monetary assets of gold and bitcoin over the weekend.

First, as we reported last month, Michael Novogratz has launched a crypto currency fund, Galaxy Investment Partners, investing largely in bitcoin, a “very big” holding of ethereum, and 30-35 other tokens and companies.  The largely anticipated correction on bitcoin happened late last week and Novogratz was there at the bottom jumping in and purchasing $15-20m worth over the weekend as the price jumped back up $1000 from its bottom.  He sees bitcoin hitting US$10,000 ($13,000) by March.

In an interview with Reuters he said he believes other large institutional investors are around 6-8 months away from adopting bitcoin.  One (though unnamed) ‘big financial firm’ could launch what he called a ‘turning point product’ within 6 months.

However in terms of legendary status on Wall St, they don’t come any bigger than Ray Dalio, head of the world’s biggest hedge fund, Bridgewater.  For context, back in August he had this to say:

“When it comes to assessing political matters (especially global geopolitics like the North Korea matter), we are very humble. We know that we don't have a unique insight that we'd choose to bet on. We can also say that if the above things go badly, it would seem that gold (more than other safe haven assets like the dollar, yen and treasuries) would benefit, so if you don't have 5-10% of your assets in gold as a hedge, we'd suggest you relook at this. Don't let traditional biases, rather than an excellent analysis, stand in the way of you doing this.”

We’ve just learned that he walked the talk and the latest disclosures show his fund increased its gold exposure via the GLD ETF by 575% to $473m and likewise iShares Gold Trust (IAU) up 266% to $138m.  Their GLD holdings now make Bridgewater the 8^th largest holder of GLD.  For context however, the world’s biggest asset manager ($5.7 trillion), Blackrock, dwarfs all comers with a holding (18.6m shares) nearly 5 times that of Bridgewater and over double the second biggest of Bank of America’s 7.1m shares.  We are firmly on record on our views of ETF’s, but keep in mind when you are big players like this, you can supposedly demand the metal not the money.  That is not a luxury afforded to every day investors…

Yesterday the World Gold Council released their latest Gold-backed ETFs update for October.  ETF holdings increased just 3.3 tonne, up to 2,347.6t globally.  That came about from Europe adding 11.2t, North America losing 8t, and Asia (who generally prefer the real thing) up 0.8t.  This is in line with the trend we outlined last week here of the US going ‘all in’ to the ‘everything’s awesome’ financial markets.  That said, year to date, inflows to gold backed ETF’s is up a solid 8%, 182.2t or $7.8b so far. 

Let us leave you with one of our favourite quotes from Ray Dalio…

“If you don’t own gold there is no sensible reason other than you don’t know history or you don’t know the economics of it”