Gold has added 65% in a year. Why doesn't Howard Marks see it as a savings vehicle?
According to a prominent investor, gold has no value as a hedge against inflation / Photo: pepperdine.edu
Howard Marks, founder of investment company Oaktree Capital Management, whose fortune Forbes estimates at $2.2 billion, questioned the value of gold as a means of preserving capital. The well-known investor shared his opinion during a recent speech to students at Pepperdine University, reports Business Insider.
What's wrong with gold?
The problem with gold is that it is impossible to determine its fair price, says Marks. He divides assets into two groups. One group includes stocks, bonds and real estate that generate cash flow and can be valued based on expected returns. The other is gold and other alternative assets that do not generate cash flow.
"You can't say what is a fair price for a barrel of oil or a bar of gold," Marks said. - How do you turn qualitative characteristics into a fair price? The answer is: it is impossible. And this is true for gold as well."
"Nothing makes gold a means of preserving capital other than the fact that people perceive it as a means of preserving capital," he added.
What does the story show?
According to Marks, experience shows that investments in such tangible assets are associated with certain risks. In the summer of 2008, he recalled, the price of a barrel of Brent oil exceeded $147, which analysts explained by limited reserves. A few months later, during the financial crisis, the cost of oil collapsed below $40, although the supply factor remained relevant, he noted.
In one of his famous notes in 2010, Marks argued that gold has all the qualities of an "ideal" investment asset, but at the same time has no value as a hedge against inflation. Although its reserves are limited, nothing makes this metal more valuable for savings than iron, except people's faith in it, he wrote.
"It is self-deception, nothing less than an object of mass hysteria, as if from the movie The Emperor's New Dress," Marks wrote at the time. - Gold has no financial value other than the value people attach to it, and it should play no role in a serious investment strategy. Of this I am convinced."
What else is being said on Wall Street?
For gold, last year was the best since 1979 - its value rose by 65%, renewing a record. The gold rally was fueled by demand from central banks and investors amid falling interest rates and geopolitical tensions. Most money managers interviewed by Bloomberg in early January said they would not significantly reduce their stake in gold as the factors supporting it in 2026 have not gone anywhere.
In turn, the famous investor Mark Mobius said that he would not buy gold at current prices, but would consider it if gold falls in price by 20%.
This article was AI-translated and verified by a human editor
