Why this investing legend dumped gold when Trump was elected

Stanley Druckenmiller, founder of hedge fund Duquesne Capital and legendary investor, sold all his gold holdings on the eve of the US election.

And there’s one very good reason or that.

Mr Druckenmiller says that all the reasons he owned gold over the past few years appear to be ending. This is a dramatic turnaround from his view back in May 2016, when he espoused the virtues of gold and said he was bearish about stocks.

That has well and truly changed now.

I basically have a large bet on economic growth,” Druckenmiller has told MarketWatch. He’s forecasting bond prices to continue falling (and yields to rise). “Interest rates have been like a beach ball being held underwater by central banks,” he says.

The hedge fund manager also seems to think that central bank stimulus efforts are coming to an end and that higher interest rates are just around the corner.

One factor that may be influencing Druckenmiller’s view is that President-elect Trump wants to unveil a huge infrastructure spending program. That could jolt the US economy into growth – good news for listed companies.

Druckenmiller is ranked 128th on Forbes’ rich list with a net worth of around US$4.4 billion – even more than Trump who has an estimated wealth of US$3.7 billion. Some rate him as the best hedge fund manager ever, after Duquesne Capital delivered annualised returns of 30% over a 25-year period between 1986 to 2010 – including not one negative year. Duquesne was closed in 2010, and Druckenmiller now manages his family’s portfolio.

30% of that portfolio was invested in gold at the end of December 2015. Now it’s zero, zilch, nada, nothing.

Gold prices had initially soared 5% to above US$1,300 an ounce as the prospect of a Trump election win gathered pace, but the potential for the new president’s policies to be good news for equities has seen gold prices sink back to pre-election levels.

More falls could be in store – not great news for ASX-listed gold miners as you can see from the falls experienced so far today.

Company Share Price Market Cap ($m) Price move
West African Resources Ltd (ASX: WAF) $0.28 $137.9 -9.5%
Perseus Mining Limited (ASX: PRU) $0.60 $616.6 -7.7%
Resolute Mining Limited (ASX: RSG) $1.47 $118.0 -7.0%
Saracen Mineral Holdings Limited (ASX: SAR) $1.19 $95.6 -6.9%
Beadell Resources Ltd (ASX: BDR) $0.42 $57.8 -6.7%
Alkane Resources Limited (ASX: ALK) $0.59 $47.4 -6.4%
OceanaGold Corporation (ASX: OGC) $3.57 $1,926.7 -6.3%
Alacer Gold Corp – CDI (ASX: AQG) $2.45 $199.2 -6.1%
Newcrest Mining Limited (ASX: NCM) $22.76 $17,450.9 -6.1%
Northern Star Resources Ltd (ASX: NST) $4.23 $339.7 -5.6%
Ramelius Resources Limited (ASX: RMS) $0.47 $244.2 -5.1%
Regis Resources Limited (ASX: RRL) $3.13 $251.3 -5.0%
EVOLUTION FPO (ASX: EVN) $2.28 $3,820.3 -4.6%
St Barbara Ltd (ASX: SBM) $2.57 $1,278.1 -4.5%
Troy Resources Ltd (ASX: TRY) $0.34 $27.3 -4.3%
Silver Lake Resources Limited. (ASX: SLR) $0.57 $45.8 -4.2%

Source: Google Finance

It’s also one reason why I said I wasn’t buying gold miners earlier this week.

If economic growth in the US and the world picks up, we could see gold prices at US$1,000 an ounce and many miners will be struggling to stay profitable.

Look out below.

3 More Rotten Shares to Sell Along With Gold Stocks, and 1 to Buy Today

After a double-digit rally for the ASX since 2016 lows, investors should be on high alert. You'll find a full rundown below of 3 shares we think you should avoid today plus one top pick worth buying, even if the market turns south and the RBA keeps rates at an "emergency low." Simply click here to uncover these stocks.

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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