Well-known hedge fund manager Paul Tudor Jones II made social media headlines this past week for a CNBC interview where he shared his views on macro conditions and investment opportunities. One of his most circulated statements said the following about the current environment: “All roads lead to inflation. I’m long gold, I’m long bitcoin. I think commodities are so ridiculously under-owned, so I’m long commodities too.”
Gold bugs rejoiced. Bitcoin maxis cheered. And commodity investors felt seen.
In truth, his call for taking a closer look at hard assets given the macro backdrop is hardly unique. It’s been a recurring theme this fall. Another well-known macro expert, Mohamed El-Erian, in an opinion piece in Financial Times this week, talked about the investment case for gold.
As he put it, “interest in exploring possible alternatives to the dollar-based payments system that has been at the core of the international architecture for some 80 years” is growing. Concerns about U.S. fiscal credibility is supportive of hard assets such as gold — as well as bitcoin and commodities.
Advisors on Same Page
Throughout several conversations we’ve been having with them as well as portfolio managers in recent months, this category of assets has been coming up frequently.
Citing appetite for diversification and risk management, inflation hedging, concerns about the dollar and the broader economy, and even timely opportunities (especially in the agricultural-harvest lows in the U.S.), advisors have sought exposure to hard assets.
For illustration, consider a few recent questions we’ve run in webcasts with an advisor audience asking for their views on gold and bitcoin. Up first, is it important to own gold? The majority — about 67% of advisors — said yes.
And how do they prefer to access gold? Overwhelmingly, they prefer ETFs.
Gold ETFs have been attracting assets since late summer as investors worry about market uncertainty. Funds like the SPDR Gold Shares (GLD) have taken in more than $2.5 billion since Sept. 1. The SPDR Gold MiniShares Trust (GLDM), the iShares Gold Trust (IAU) and other gold ETFs have also benefited from that demand, which has picked up pace in recent weeks as gold rewards investors.
The precious metal is up about 31% so far in 2024, outpacing both the S&P 500 and the Nasdaq-100 as measured by the SPDR S&P 500 ETF Trust (SPY) and the Invesco QQQ Trust Series 1 (QQQ).
On the bitcoin front, demand has also been strong, especially considering how new this category is for the advisory channel.
In a recent webcast, we asked advisors: Do you own bitcoin on behalf of clients? Almost half of them already do.
That’s robust adoption in a category where spot bitcoin ETF access only became available earlier this year. Today, spot bitcoin ETFs already command more than $60 billion in assets, and they aren’t even one year old yet.
This bitcoin adoption level is especially impressive in the advisory channel if you consider how prepared advisors feel to discuss bitcoin with clients. We asked, and the answer was surprising. About half of them feel unprepared for that conversation. The opportunity here for expansion of access is huge if you consider where we sit on the educational front.
Performance certainly helps, and bitcoin prices have been rising. Year to date, bitcoin prices are up about 60%. And gains on a 12-month window are well in the triple digits. That's roughly 3x the gains of gold in the same period.
Gold vs. Bitcoin
If like many advisors and investors, you too are looking to add gold and/or bitcoin to your portfolio, here are some key considerations:
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Portfolio fit: Both are known as portfolio diversifiers, but they have different risk profiles. Gold is a time-tested, stable safe haven that’s uncorrelated to stocks and bonds. Bitcoin is younger, much more volatile, and it shows some correlation to growth stocks (consider the positive correlation to an ETF like QQQ).
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Supply dynamics: Both gold and bitcoin face limited supply, but in the case of bitcoin, it’s truly limited. We know there will only be 21 million bitcoins ever. Estimates suggests about 75% of the world’s gold has already been mined, but there’s always a chance of discovering a new mine deposit. Either way, scarcity supports prices overtime if demand persists.
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Demand reach: Central banks are big buyers of gold and gold ETFs, and so are institutions. These professional investors provide a lot of support to the category. For bitcoin, that’s all new terrain, with a lot of the action being centered on the retail front. That said, institutions are now beginning to add bitcoin ETFs to their mix. That reach should expand as the category matures.
ETFs make accessing these assets easy, and product innovation makes it interesting. Consider, for example, a new fund that launched this month by Quantify Funds offering 2-for-1 exposure to both gold and bitcoin: the STKD Bitcoin & Gold ETF (BTGD).
The fund uses bitcoin and gold futures as well as bitcoin and gold ETFs to offer $1 of gold and $1 of bitcoin exposure for every $1 invested.
Agricultural Commodities
Commodities too have been an increasingly popular play for advisors.
The diversification power of commodities is one of the category’s biggest appeals. But there’s also a timely opportunity in pricing trends. Consider this chart the team at Teucrium ETFs recently shared with us showing just how low corn futures prices have come near to production costs. Corn is a good benchmark for agricultural commodities more broadly.
As Sal Gilbertie, head of the firm, puts it, downside potential at current levels looks very limited given how farmers are faced with prices near production costs. But the upside potential is big as supplies come off harvest highs.
In the third quarter, commodity ETFs picked up nearly $4.5 billion in assets.
The takeaway is that gold, bitcoin, and commodities more broadly are all rising to the task of diversifying risk and offering interesting opportunity to investors. ETFs make access to these hard assets easy.
If you are looking to dive in, we invite you to start your product due diligence here. Check out our Bitcoin ETF List, our Gold ETF List and our Commodities ETF List.
For more news, information, and analysis, visit VettaFi | ETF Trends.
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