Druckenmiller Bought Gold After Reversing November Stance

(February 8, 2017 - by Katherine Burton and Katia Porzecanski)

Stan Druckenmiller, the billionaire investor with one of the best long-term track records in money management, said he bought gold in late December and January, reversing the sale he made after the U.S. presidential election.

“I wanted to own some currency and no country wants its currency to strengthen,” Druckenmiller said Tuesday in an interview. “Gold was down a lot, so I bought it

Druckenmiller, who had held a gold position going into the November election, sold it on election night, explaining in a CNBC interview that he was optimistic that President Donald Trump’s administration would bring deregulation and “serious” tax reform that spurs growth. Those benefits, he said, were expected to outweigh concerns about more protectionist trade policies. “All the reasons I owned it for the last couple of years seem to be ending,” he said at the time.

Indeed, Trump’s victory sent U.S. equities to a record high and left gold tumbling, as investors speculated that economic growth and interest rates would rise. In December, both U.S. Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi warned that economic growth could be derailed, comments that spurred Druckenmiller to make his purchase.

So far it’s paid off, as confusion over Trump’s policies helped rekindle haven demand for the precious metal. Gold is also benefiting from speculation that the Fed may be more cautious in raising U.S. interest rates amid concerns that the new administration’s policies could stifle growth. At about $1,234 an ounce as of 9 p.m. New York time on Tuesday, the spot price for gold was up almost 10 percent from its December low.

Uncertainty over whether Trump will back the House Republican tax plan is another reason Druckenmiller bought gold, he said. The Republican leadership has proposed a 20 percent border-adjustment tax on imports as a way to encourage more manufacturing in the U.S. If instituted, that plan could lead to as much as a 25 percent gain for the dollar, according to a report by the Peterson Institute for International Economics.