What was behind that decision?Many headlines proclaimed that Buffett had changed his mind about moneyBut there were many counterarguments – one suggested it may have been Another person from Berkshire It wasn’t Buffett himself who made the deal.others point out that there is a difference Between investing in gold and investing in gold mining companies. Still others argue that Berkshire’s stake in Barrick relatively small compared to other holdings.
Ultimately, Buffett’s position at Barrick turned out to be a short one. Berkshire Hathaway pulled out just two quarters after him, but this was long enough to pay off gold’s big rally due to his COVID-19 crisis. Perhaps the Oracle of Omaha was cued by the precious metal’s status as a safe-haven asset in times of economic uncertainty.
Whatever the reason for Berkshire’s move, it’s interesting to look back at some of the comments Buffett made about gold. He doesn’t spend a lot of time arguing about the yellow metal (he doesn’t like it, after all), but he speaks enough to not mistake his stance. Let’s take a look at three quotes that summarize what Buffett thinks about gold.
What does Buffett say about gold?
1. “Gold has two major drawbacks.”
“Gold … has two serious drawbacks. On the other hand, if you own an ounce of gold forever, you will end up with an ounce.”
— Buffett, Letter to Shareholders, 2011
Buffett’s 2011 letter to shareholders contained a rather lengthy discussion of gold, which hit a record high of about US$1,920 an ounce in September of that year.
In the letter, Buffett presents three types of investments, placing gold in the second category, which includes “assets that don’t produce anything.” According to Buffett, when buyers buy these assets, they expect someone to pay them more in the future. “Owners are not inspired by what the asset itself can produce, but rather that the asset will die forever. Rather, the belief that others will want it more eagerly in the future.” inspired by,” he said in the letter.
gold advocate reacted strongly to those comments, argues that gold points are not what it can produce. Instead, its value comes from the fact that it is a source of protection during a crisis.
Others have pointed out that gold actually has a good track record of generating returns. Investors (NASDAQ:GROW) Chief Investment Officer Frank Holmes said the Oracle of Omaha is simply wrong about the yellow metal.
“Buffett has always been reluctant about gold. His own company pays no dividends, and his previous argument was that gold doesn’t pay income,” Holmes said. Wrong: Since 2000, bullion has significantly outperformed the S&P 500 (INDEXSP:.INX), beating Berkshire Hathaway 2-1. “
2. “It doesn’t do anything… except look at you.”
“I don’t have a view on where (the money) will be (in the next five years), but all I can say is, look at you. CNBC’s Squawk Box, 2009
Most of what else Buffett says about gold is related to two failures he mentioned in his 2011 letter to shareholders.
On a 2009 episode of CNBC’s Squawk Box, Buffett expressed his thoughts on these issues in a slightly different way. Buffett said he has no opinion on gold over the next five years and where it will go if it should be part of a value investing strategy. Then look at you,” he said.
This contrasts with stocks that Buffett said will generate cash, such as Coca-Cola (NYSE:KO) and Wells Fargo (NYSE:WFC). he explained.
The comment ends with another famous quote about gold that Buffett has repeated in various ways over the years. Putting money into the United States and the New York Federal Reserve doesn’t seem like a great asset to me. “
For Buffett, value has to do with utility, and gold has neither of those without a specific use.Interestingly, the same thought process doesn’t apply to silver – Buffett put money in silver beforeand believes that its dual nature as both a precious metal and an industrial metal makes it useful and valuable.
3. “Gold is the way to last in fear”
“For example, if you have an asset like gold, basically gold is a way to go long in fear, and sometimes a pretty good way to go long in fear. And when they become more fearful, you can make money. CNBC’s Squawk Box, 2011
Buffett has also spoken quite extensively about his belief that people who buy gold are inherently betting on fear. also brought up this idea in a 2011 letter to shareholders.
“What motivates most gold buyers is their belief that fear will increase,” he said in the letter. And indeed, gold is often described as a safe investment. In other words, people flock to gold in times of turmoil to feel more secure and to balance out other areas of their portfolios.
Buffett admits that “over the past decade, this belief has been proven correct,” but in other words, fear has spurred demand for gold. , which brings us back to the idea of infertility.
As he explains, all the gold in the world at the time was worth US$7 trillion. By his calculations, that’s about 1 billion acres of farmland in the United States plus seven ExxonMobil (NYSE:XOM) companies, plus he has $1 trillion to spare.
“And if you offered me the option of looking at a 67-foot cube of gold…and the alternative was to take all the farmland in the country, everything, cotton, corn, soybeans, seven ExxonMobil Think about it, add in $1 trillion of walking around money, and I, you know, call me crazy, but I’ll take farmland and ExxonMobil.” He said.
This is an updated version of an article first published in 2020 by the Investing News Network.
Securities Disclosure: I, Melissa Pistilli, do not make direct investments in the companies mentioned in this article.
Editorial Disclosure: Investing News Network does not guarantee the accuracy or completeness of information reported in interviews it conducts. The opinions expressed in these interviews do not reflect those of Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
window.REBELMOUSE_LOWEST_TASKS_QUEUE.push(function(){
var scrollableElement = document.body; //document.getElementById('scrollableElement');
scrollableElement.addEventListener('wheel', checkScrollDirection);
function checkScrollDirection(event) { if (checkScrollDirectionIsUp(event)) { //console.log('UP'); document.body.classList.remove('scroll__down'); } else { //console.log('Down'); document.body.classList.add('scroll__down'); } }
function checkScrollDirectionIsUp(event) { if (event.wheelDelta) { return event.wheelDelta > 0; } return event.deltaY < 0; } }); window.REBELMOUSE_LOWEST_TASKS_QUEUE.push(function(){ !function(f,b,e,v,n,t,s){if(f.fbq)return;n=f.fbq=function(){n.callMethod? n.callMethod.apply(n,arguments):n.queue.push(arguments)}; if(!f._fbq)f._fbq=n;n.push=n;n.loaded=!0;n.version='2.0'; n.queue=[];t=b.createElement(e);t.async=!0; t.src=v;s=b.getElementsByTagName(e)[0]; s.parentNode.insertBefore(t,s)}(window,document,'script','https://connect.facebook.net/en_US/fbevents.js'); fbq('init', '2388824518086528'); });