In an interview with Bloomberg TV, billionaire investor Sam Zell revealed that he has purchased gold, despite decades of vocally criticizing investors purchasing gold as an inflation hedge.
“It feels very funny because I’ve spent my career talking about why would you want to own gold? It has no income; it costs to store. And yet, when you see the debasement of the currency, you say, ‘What am I going to hold on to?’” Zell said in the interview.
Zell voiced concern about inflation in the U.S., and wondered if Federal Reserve chairman Jerome Powell was correct that inflation would be transitory. He went on to note the similarities between the conditions of this moment and the 1970s. He sees the governments around the world resorting to “printing money” in order to deal with the economic ramifications of the COVID-19 pandemic.
The inflation risk has grown so high, says Zell, that it has made gold an attractive investment to him, while other opportunities have become less appealing. Despite a joint venture in fossil fuels with Tom Barrack Jr.’s Colony Capital Inc. in 2019, Zell has cooled significantly on oil and gas.
“Right now, oil and gas is not priced to reflect the risk of what’s going on, whether it be in the EV [electric vehicle]world, a climate changed world,” he said in the interview. “As recently as a couple of years ago I thought the risk-reward ratio was appropriate. It’s clearly become very inappropriate as our political situation has changed.”
Real estate also seems like an unsafe bet to Zell. “Everybody’s worried about going back to work and office-space occupancy. I don’t think that’s really an issue,” he said. “The problem is that, before the pandemic, we were dealing with an oversupply of office space. Obviously the pandemic hasn’t reduced that oversupply and has probably encouraged it accordingly.”
He went on to note that uncertainty looms over whether stores, hotels, and brick-and-mortar retailers can adapt to a post-pandemic world, and how fast.
Zell’s change of heart on gold could have a positive impact on the precious metal’s price, which was already gaining steam in 2021. That in turn could benefit miners, who profit from higher gold prices.
Investors looking to position themselves in miners can turn to the Sprott Gold Miners ETF (SGDM), which is an actively managed fund tracking gold and silver miners.
Meanwhile, the Sprott Junior Gold Miners ETF (SGDJ) tracks junior gold miners.
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