Buffett is still one of the biggest opponents of gold. In his opinion, gold has two major flaws.
Gold prices have risen by more than 10% so far this year as geopolitical tensions rise in the Middle East, Europe, and Asia, and demand for safe havens has risen, but its insane rise has not changed the views of Buffett, one of the biggest opponents of gold.
The main reason this “Omaha prophet” doesn't like gold is that it doesn't generate any profit, such as profit, and it can't be valued; its rise and fall are entirely dependent on speculation.
Buffett wrote in his 2011 annual letter: “Gold has two major flaws; it is neither very useful nor productive. It is true that gold has some industrial and ornamental uses, but demand for these uses is both limited and unable to absorb new production. At the same time, when you have an ounce of gold permanently, you end up with an ounce of gold.”
On Friday, the price of gold hit a record high of $2431.38 per ounce, for the third consecutive week of gains. Investors have been racing to buy this precious metal as geopolitical risks rise. Also, since the supply of gold is limited, and unlike fiat currency, it can be issued indefinitely by the government, gold is also sometimes used as a hedge against inflation.
Buffett once imagined a situation in a 2011 interview to explain his views on gold: “If you collect all the gold in the world, you'll get a cube 67 feet high and 67 feet wide. According to the market price at the time, its value would reach 7 trillion dollars.”
He went on to add, “(With this money), you can choose to own one-third of America's shares, or you can choose to own that little piece of gold, but the latter can't do anything other than shine there and make you feel like someone like Midas or Chloisos.”
The Berkshire Hathaway CEO said he is more willing to buy productive assets, whether businesses, farms, or real estate, which can increase output and value even in an inflationary environment.
The 93-year-old legendary investor believes most gold buyers are motivated by their belief that there will be more and more people who are afraid.
In a 2011 interview, Buffett said, “Essentially, to go long for gold is to be afraid. Gold bulls must expect people to become more fearful within a year or two than they are now. If they're more afraid, you'll make money; if they're less afraid, you'll lose money.”
Editor/Somer