Does Warren Buffett Invest in Precious Metals?
Buffett has repeatedly made clear in interviews and his annual shareholder letter that precious metals do not represent an investment worth considering.
He bases his criticism of gold on basic value investing principles that emphasize productive assets over speculative ones; gold lacks both these qualities in his estimation, making him prefer businesses as more rewarding investments.
Why Buffett Doesn’t “Get” Gold
Gold has long been recognized as an outstanding investment due to its value as a store of wealth, offering protection in times of economic or geopolitical turmoil. Many investors, such as billionaire hedge fund manager Ray Dalio, include it in their portfolios.
However, Buffett does not share this view and outlines his reasoning in his annual shareholder letter.
Buffett sees two key shortcomings with gold. First, he does not find it “procreative.” While decorative and industrial applications exist for gold, no tangible output exists that could add any real value compared to oil wells that produce crude or stocks which produce dividends.
Buffett’s view of gold is crucial as it offers a lesson about productive and non-productive assets, emphasizing why wealth building investors should prioritize productive assets over non-productive ones like gold. As it’s not considered productive by Berkshire Hathaway’s investment portfolio, gold won’t appear there either.
Why Buffett Doesn’t “Get” Silver
Warren Buffett’s Berkshire Hathaway recently purchased 130 million ounces of silver, taking many by surprise but being exactly the kind of value investment Buffett excels in.
Buffett gave as his reason for investing in silver the “bubbly characteristics in its price, which was rising like crazy,” but this explanation seems inadequate. While gold may have long been considered a safe-haven investment, its rise represents more of a momentum play than anything else.
And that’s why it’s so disappointing when people jump onto the “gold is the best” bandwagon; as it only serves to emphasize this precious metal’s lack of utility. Digging holes, burying it and paying someone to keep guard over it doesn’t add value; when other products such as copper or steel can do all that better. Unfortunately, this problem has only worsened over time.
Why Buffett Doesn’t “Get” Platinum
Berkshire Hathaway’s entry into gold mining may seem counterintuitive when considering the investment philosophy of Warren Buffett. His beliefs center around creating wealth through investing in businesses that produce goods, services and income over time – unlike gold which experiences its own cycle of boom-and-bust returns.
But that doesn’t mean Buffett disdains gold, rather, he prefers more “practical” silver as its applications range across industries and it has no comparable replacements.
As for stocks, Berkshire Hathaway prefers steady profits over wild fluctuations of the financial sector. That is why they recently reduced their stake in Goldman Sachs and are building positions in Barrick Gold Corporation instead. Berkshire also began diversifying into non-financial commodities like platinum in order to increase returns for investors – something silver can provide.
Why Buffett Doesn’t “Get” Palladium
Buffett views gold as an “idle asset.” It doesn’t generate income or produce anything tangible, and its worth solely rests on someone paying more for it in the future. He prefers assets which generate income over time such as farmland, companies, or even its relative – platinum.
Last quarter, to the surprise of many market watchers, Buffett’s Berkshire Hathaway surprised many market observers when it made an unexpected move and purchased $563.6 million worth of shares in Barrick Gold – making a bold u-turn from Buffett who once quipped that all the gold in existence could fit on a baseball infield!
But Buffett’s company’s brief exploration into precious metals doesn’t necessarily indicate any change to his stance on gold; to understand this phenomenon, one needs to look back over his past statements and philosophy of investing.
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