Does Warren Buffett Invest in Precious Metals?

Warren Buffett is an iconic investor with an incredible track record. The Oracle of Omaha is well-known for his distaste for gold investments, which he categorizes under “unproductive assets”.

Just as an expert chef knows which ingredients combine for delicious cuisine, Berkshire Hathaway CEO Warren Buffett prefers assets that produce income and appreciate over time – such as stocks and real estate as well as some silver.

Gold

Gold has long fascinated humanity since the dawn of civilization. Associating wealth, power and divinity with gold transcends cultural barriers and time zones alike – yet, despite its allure the Oracle of Omaha remains skeptical when considering it as an asset class to invest in due to a set of core investing principles and logic deductions.

Buffett believes the true value of investments lies in their usefulness; gold cannot fulfill this role on its own. He favors productive assets created by businesses which create jobs, develop products, and propel human progress forward.

Berkshire Hathaway’s comments regarding gold provide insight into his view of its place within a diversified portfolio. Although he does not personally own gold bullion directly, he owns shares in some of the largest gold mining companies globally. While not buying bullion directly himself, his remarks on its place within it do shed some light.

Silver

Berkshire Hathaway, owned by Warren Buffett’s Berkshire Hathaway holding company, purchased nearly 30 billion dollars’ worth of silver in 1998 – enough for approximately 3 billion in value – through his holding company Berkshire Hathaway. Berkshire issued an unusual press release regarding their investment amidst accusations of price manipulation by some parties and subsequent investigations by the Commodity Futures Trading Commission (CFTC).

Warren Buffett doesn’t view gold as an investment but rather as a store of value, noting its lack of utility beyond jewelry and failing to meet his criteria for productive assets. Silver, on the other hand, has numerous industrial uses ranging from solar energy production and medical device production to cameras and cellphones as well as nontoxic properties which make it a better choice than gold for protecting wealth during times of economic instability.

Platinum

Platinum is an exceptionally rare metal; only about 6 million ounces (170 metric tons) are produced every year compared to 108 million ounces (3,062 tons) of gold and 860 million ounces (24,381 tons) of silver production each year. As its scarcity ensures, platinum commands a higher price tag than these precious metals.

Gold is more durable than platinum, making it the preferred metal for engagement and wedding rings that must withstand daily use. One factor contributing to its longevity is that when rubbed against hard surfaces it forms “ridges”, helping prevent scratches that would cause gold prongs to break off.

Though precious metals may play a place in any portfolio, they should not be the primary focus. A well-diversified investment strategy should incorporate stocks, bonds and real estate – with perhaps some allocation of physical precious metals being part of that mix.

Palladium

Palladium, part of the platinum group metals, is an extremely useful silvery-white metal used for industrial applications. As part of this group of precious metals – including platinum, rhodium, ruthenium and iridium – palladium has many distinct properties that make it useful in certain circumstances. These include being resistant to corrosion as well as being integral part of chemical processing equipment or catalytic converters used to reduce harmful emissions from automobiles.

Buffett has made his position on gold investing clear; he believes it doesn’t fit with his value investing strategy, which involves buying assets at discounted prices. Many who invest in precious metals often focus on gold as an enduring store of value; however, Buffett prefers assets with clear applications over those without clear goals for use or utility.


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