Matthew McLennan, co-head of First Eagle, which manages nearly $100 billion, advocated for gold investments at the Sohn Hearts & Minds conference in Sydney. First Eagle has a significant stake in gold, allocating approximately 15 per cent of its fund to gold and gold mining companies. McLennan emphasised gold’s role as a hedge against what he termed “nominal drift,” referring to the devaluation of assets amid rising debt levels.
McLennan noted growing market concerns about escalating debt, stating, “The 2020s are very different from every other post-war decade. The budget deficits today are about 4 per cent wider than you would expect given the level of unemployment in the economy.” He pointed out the unusual simultaneous rise of gold and stocks, attributing it to increasing debt. He added that the rising prices are a sign of increased treasury issuance, indicating potential market instability.
Referencing historical trends, McLennan drew parallels to the 1970s and early 1980s, suggesting that gold prices could increase exponentially relative to outstanding debt. He also advised that gold should be co-owned with stocks. “The observation is that owning gold and equities together, you can see the geometric average of the two has been far more stable than owning either or.”
First Eagle Investment Management is an investment management firm. The firm focuses on actively managed, fundamental, and long-term investments, managing assets across various investment strategies, including value, global value, and alternative credit. McLennan believes the core challenge of investing is preserving capital in real terms over the long term through a combination of defensive and offensive real assets. He advised investors to broaden their horizons by considering equities outside the United States.
