RC Drilling Delivers High-Grade Gold Intersection at Guyer
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 U.S. 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 company doesn’t pay a dividend, and his argument before was (that) gold doesn’t pay income,” Holmes said. “He’s totally wrong. Since 2000, bullion has far outperformed the S&P 500 (INDEXSP:.INX) by two to one, and it’s outperformed Berkshire Hathaway.”
2. “It won’t do anything … except look at you”
“I have no views as to where (gold) will be (in the next five years), but the one thing I can tell you is it won’t do anything between now and then except look at you” — Buffett, CNBC’s Squawk Box, 2009
Most of the other things Buffett has said about gold relate to the two failings he mentions in his 2011 letter to shareholders: the metal’s lack of utility and the fact that it’s not procreative.
During a 2009 episode of CNBC’s Squawk Box, Buffett aired his thoughts on those issues in a slightly different way. Speaking about gold in the next five years and if it should be part of a value investing strategy, Buffett said he had no opinion on where it might go — “The one thing I can tell you is it won’t do anything between now and then except look at you,” he said.
Read More: RC Drilling Delivers High-Grade Gold Intersection at Guyer