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The Hard Assets Alliance Blog

This One Table Shows What Happens If Institutional Investors Shift Just 2% of Assets into Gold

Institutional portfolio managers control a lot of money. Lots and lots of money. And their allegiance is not to any particular asset class or sacred-cow portfolio theory. They’re in business to safeguard and grow their clients’ money.

To that end, we’ve already started to see the embers of interest in gold from this elite fraternity of market movers.

So, think about what would happen if they decided security markets were too volatile, or bonds too insecure, or currencies too unstable, or central bankers too indecisive, and moved just 2% of their assets into gold.

How Much Can You Buy With $1.5 Trillion?

This table from Towers Watson shows the assets under management (AUM) from the 500 largest asset managers in the world.

Check out how much money would be allocated to the sector if just 2% of those assets were moved into gold, and the amount of gold needed to meet this new demand…

Total AUM 2% of AUM Ounces of Gold % of Global Mine
Production in 2015
% of Global Gold
Demand in 2015
$78.1 trillion $1.562 trillion 1.37 billion 1,220% 923%
Source: Towers Watson; based on $1,250 gold price

If just 2% of global financial assets under active management were to seek a new home in gold, it would mean a shift of $1.5 trillion. For some context, this would represent over 12 times last year’s production, and over 9 times total demand… globally.

That would be a space-mission-sized shift, “Gold market, we have a problem.” There isn’t anywhere near this amount of gold available for investment. Not even close.

Even if our assumption is off by 1,000% and just one-tenth of this dollar amount headed into gold, it would still soak up every ounce of gold mined worldwide last year.

And as big-league fund manager Dan Tapiero points out in this interview, fund managers are indeed likely to direct some of their assets into the gold market. Risk is higher in virtually every major component of the economy—stocks are vulnerable, real estate looks lofty, subpar growth is pervasive, deflation is persistent, and perhaps most troubling is that the Fed and other central bankers are running out of tools to turn things around.

Forget the debate about how much money portfolio managers might move into gold. The issue is simply about when they will begin the process in earnest. Because once they do, even a small allocation would upset this tiny industry. And that would have a major implication on the gold price.

Watch the Short Interview with Dan Tapiero on Institutional Investors’ Interest in Gold

Dan Tapiero has been a global macro portfolio manager for over 20 years. He’s reached uber status, as he’s worked with some of the best hedge fund managers of our time—Steve Cohen, Stan Druckenmiller and Michael Steinhardt, to name a few. Learn why this highly successful fund manager is preparing for just such a move. Click here to watch the video!

 

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