The so-called gold bulls are running wild, with each day's economic shock wave convincing more investors to stock up on the precious metal long espoused as a haven in troubled times. But one New York billionaire does not see gold just as an effective hedge: he has devoted his entire portfolio to it. Thomas Kaplan, the head of the Tigris Financial Group, is believed to have made what is essentially a $2 billion (Dh7.34bn) bet on gold, the physical variety as well as stakes in a number of mining companies dotted around the globe.
"I've reached a point where I feel the only asset I have confidence in is gold," Mr Kaplan told The Wall Street Journal this week. The newspaper dubbed him "the bull of bullion", as investors who are optimistic about an asset are called "bulls" on Wall Street. Mr Kaplan is hardly alone, at least in terms of his outlook on gold. Many fund managers, at the institutional as well as individual level, are devoting larger percentages of their holdings to gold and other precious metals as a hedge against inflation.
But the infatuation goes beyond the professional investor class. "The level of interest in gold from the man in the street is unprecedented," said Jeffrey Rhodes, the chief executive of INTL Commodities in Dubai. Intense buyer interest helped push gold to an all-time high of $1,242.70 per troy ounce on May 12. It closed at $1,213.40 in New York on Friday. Recent events have only reinforced the views of many in the Gulf and south Asia, where gold is often the dominant savings vehicle for families. In India, higher prices did little to scare away buyers: gold demand soared 698 per cent there in the first quarter of this year compared with the same period last year.
Those families hope Mr Kaplan's hunch is correct. The Oxford-educated American, who made his fortune in silver and natural gas, reportedly convinced his fellow billionaires George Soros and John Paulson to sink millions into a gold mining company, albeit as a part of more diversified portfolios. Mr Kaplan's bold investment is unusual, said Mr Rhodes, who has worked as a bullion banker for more than 30 years. Most sophisticated investors keep between 5 and 10 per cent of their portfolios in gold. "If you were really bullish or really concerned, you might go up to 15 per cent. But that is very rare," he said.
Still, similar moves have paid off before. In November of 2008, there were media reports that a Saudi Arabian syndicate purchased $3.5bn in gold. If true, that turned out to be a profitable play: gold prices are up almost 50 per cent since then. breagan@thenational.ae