Systematic Aircore Drill Testing of High Potential Gold Targets Underway at

By Finance News On Oct 13, 2024

What was behind that decision? Many headlines proclaimed that Buffett had changed his mind on gold. But there were plenty of counterpoints — some suggested that it could have been another person at Berkshire that made the trade and not Buffett himself; others pointed out that there’s a difference between investing in gold and investing in a gold-mining company. Still others noted that Berkshire’s stake in Barrick was relatively small compared to its other holdings.

Ultimately Buffett and Berkshire’s position in Barrick turned out to be a short one. Berkshire Hathaway exited only two quarters later, which was just long enough to reap the rewards of gold’s big bump from the COVID-19 crisis. Perhaps the Oracle of Omaha was clued in to the precious metal’s status as a safe-haven asset in times of economic uncertainty.

Whatever the reason for the moves at Berkshire, it’s interesting to look back at some of the comments Warren Buffett has made about gold. While he hasn’t spent a huge amount of time discussing gold (after all, he doesn’t like it), he’s spoken enough about it that there’s no mistaking his stance. Here’s a look at three quotes that sum up what Warren Buffett thinks about gold.

What has Warren Buffett said about gold?

1. “Gold … has two significant shortcomings”

“Gold … has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end”
— Warren Buffett, letter to shareholders, 2011

Warren Buffett’s 2011 letter to shareholders includes a fairly lengthy discussion on gold, which hit what was then an all-time high of around US$1,920 per ounce in September of that year.

In the letter, Buffett lays out three types of investments, placing gold squarely in the second category, which involves “assets that will never produce anything.” Buyers purchase these assets, according to Buffett, with the hope that someone else will pay more for them in the future. “Owners are not inspired by what the asset itself can produce — it will remain lifeless forever — but rather by the belief that others will desire it even more avidly in the future,” he states in the letter.

Gold advocates reacted strongly to those comments, arguing that the point of gold isn’t what it can produce; instead, its value comes from the fact that it’s a source of protection in times of crisis.

Others have pointed out that gold does in fact have a good track record of producing returns. Responding specifically to Buffett’s comment that an ounce of gold will always only be an ounce of gold, Frank Holmes, chief investment officer at US Global Investors (NASDAQ:GROW), said that the Oracle of Omaha is simply wrong about the yellow metal.

“Buffett’s always been negative on gold; his own…