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‘Big Short’ investor Michael Burry just made a big bet on gold — and dumped tech giants Alphabet and Amazon

‘Big Short’ investor Michael Burry just made a big bet on gold — and dumped tech giants Alphabet and Amazon
‘Big Short’ investor Michael Burry just made a big bet on gold — and dumped tech giants Alphabet and Amazon

Michael Burry’s moves tend to make headlines.

The hedge fund manager famously bet against the U.S. housing market in 2008 and won big — a move that was depicted in the hit movie “The Big Short.”

Since then his investments have been closely watched.

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According to a filing with the Securities and Exchange Commission, Burry’s company Scion Asset Management has made quite a few adjustments to its portfolio in Q1 of 2024.

Among Burry’s notable moves were selling his stakes in Amazon (AMZN) and Alphabet (GOOGL) and increasing his holdings of Chinese companies (JD) and Alibaba (BABA).

Burry also made a substantial bet on gold by purchasing 440,729 shares of Sprott Physical Gold Trust (PHYS), valued at $7.6 million at the end of Q1, making it the fifth-largest position in his portfolio. The closed-end fund's official website says it holds “substantially all of its assets in physical gold bullion.”

A unique feature of the Sprott Physical Gold Trust is that investors have the right to redeem their units for physical metals on a monthly basis, provided they meet the minimum redemption amount. This requirement is quite substantial, as "a unitholder must have enough units to equate to one full-sized London Good Delivery bar (approximately 400 oz)."

Gold’s gleaming rise

Gold is already experiencing a remarkable surge. At the beginning of this year, the precious metal was trading at $2,062 per ounce. Today, it’s at $2,357 per ounce, reflecting a 14.3% increase.

To put this into perspective, gold has outpaced the S&P 500, which has gained 11.7% over the same period.

There are many reasons why investors might want to add gold to their portfolios. One notable reason is inflation. Inflation often arises from central banks' ability to freely print fiat money. Gold, however, cannot be created out of thin air. Its relative scarcity and durability make it a reliable hedge against inflation, preserving purchasing power when paper currency loses value.

Additionally, gold can act as a safe haven during times of economic uncertainty and geopolitical tension. During periods of market volatility or global instability, investors often turn to gold for its stability and reliability. This precious metal has historically maintained its value, making it a trusted asset in uncertain times.

Read more: Rich young Americans have lost confidence in the stock market — and are betting on these assets instead. Get in now for strong long-term tailwinds

For those looking to follow Burry's lead and add a touch of gold to their portfolios, here are three easy ways to do it.

Buy gold bullion

The most straightforward way to invest in gold is to buy physical gold in the form of bars or coins.

Gold bullion can be purchased from reputable dealers and stored securely at home or in a safety deposit box.

The advantage of owning physical gold is its stability and tangibility, providing a sense of security and ownership that isn't dependent on financial institutions. However, it requires secure storage and insurance, which can add to the overall cost of investment.

Invest in gold stocks/ETFs

Investors can also purchase shares of gold mining companies. When the price of gold rises, miners tend to enjoy bigger profits, potentially boosting the value of their stocks.

Adding gold mining companies to your portfolio can provide diversification. However, keep in mind that doing so also exposes investors to market risks and the performance of the underlying companies.

In addition, there are exchange-traded funds (ETFs) that track the performance of gold. These ETFs aim to mirror the price movements of gold by holding physical gold or gold futures contracts.

Because gold ETFs trade on major stock exchanges, investors have the ability to buy or sell shares at market prices throughout the trading day. They provide a convenient way to gain exposure to gold without the need for physical storage or dealing with the logistics of buying and selling bullion.

Invest in a gold IRA

Individual Retirement Accounts (IRAs) are a popular way to save for retirement, offering tax advantages that can help grow your savings over time. Traditional IRAs allow you to contribute pre-tax income, with taxes deferred until you withdraw the funds during retirement. Roth IRAs, on the other hand, involve contributions made with after-tax dollars, providing tax-free growth and tax-free withdrawals in retirement.

A gold individual retirement account (IRA) is a specific type of IRA that allows investors to include physical gold and other precious metals in their retirement savings. This type of IRA offers the same tax advantages as traditional and Roth IRAs but provides the added benefit of diversifying your portfolio with tangible assets. Gold IRAs are appealing because gold is often seen as a hedge against inflation and economic uncertainty, helping to protect your retirement savings from market volatility.

There are drawbacks, like relatively lower returns, no dividends and fees you have to pay to buy and store the actual metal.

If you believe in the yellow metal’s long-term potential, a gold IRA could be a valuable addition to your retirement strategy. However, make sure it’s only a small part of a diversified portfolio.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.