Why Warren Buffett now likes gold
Warren Buffett, who has has long ridiculed gold as a non-productive asset, now thinks it is set to shine, after buying shares in miner Barrick Gold.
Warren Buffett has long ridiculed gold as a non-productive asset that is no match for the dynamism of American stocks. Yet now it seems he thinks gold is set to shine. Buffett’s Berkshire Hathaway took a $565m stake in Barrick Gold, the world’s second-biggest gold miner, in the second quarter.
Gold has rallied strongly this year, reaching new all-time dollar highs thanks to fears about inflation, dollar weakness and tumbling bond yields. Yet after peaking at $2,070 an ounce on 6 August the yellow metal tumbled by 9% over the following week. It remains up roughly 30% this year, but the pullback was a reminder that gains can quickly turn into losses in this volatile market. The gold miners are “riding high” this year, but extracting the metal is becoming more challenging, says Alistair MacDonald in The Wall Street Journal. The average cost of finding one ounce of gold has more than doubled since the decade leading up to 2009, according to figures from Minex Consulting. That said, constrained supply won’t necessarily mean higher prices: unlike oil, the metal is not consumed but is “virtually indestructible” once dug out of the ground.
More important for gold is demand, and there are reasons to be bullish, says Tom Stevenson in The Daily Telegraph. Bears point to 2011, when inflation failed to appear and growth exceeded expectations, for what can happen when gold gets carried away. A repeat of that scenario is possible. But 2020 reminds me of 1979, another year marked by turbulent politics and questions about the existing monetary paradigm. Not coincidentally, gold prices more than quadrupled. “Agonising about whether you missed” the rally at $2,000/oz “will seem ludicrous if we get a rerun of 1979’s flight to safety”.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
![https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg](https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748-320-80.jpg)
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Revolut finally bags a UK banking licence – what's next for the fintech?
Revolut has finally been granted a UK banking licence following three years of negotiations with the regulator
By Kalpana Fitzpatrick Published
-
Could Labour impose a “double death tax” of more than 50%?
Speculation is mounting that capital gains tax will be reformed in the Budget - and one option is to charge bereaved families the tax on top of inheritance tax. We explain how it could work
By Ruth Emery Published
-
UK mid-caps: an improving outlook
UK mid-caps have perked up and the rally may run further, but long-term investors should remain selective
By Cris Sholto Heaton Published
-
The tobacco industry is going smoke-free - how to profit from it
Tobacco companies have realised their traditional products are on the wane. But new opportunities have opened up – and should prove lucrative
By Rupert Hargreaves Published
-
Is it time to invest in creative industries?
Any industrial strategy should not overlook the creative industries, one of our top national assets
By David C. Stevenson Published
-
Is Mercia Asset Management set for success?
Mercia Asset Management helps the government fund smaller companies in Britain’s regions. Should you invest?
By Rupert Hargreaves Published
-
British stocks set for a boost
British stocks are due for a bounce as the UK looks more stable compared to many economies
By Alex Rankine Published
-
Ocado shares jump by a fifth
Ocado takes a turn for the better after attractive profit forecasts were announced
By Dr Matthew Partridge Published
-
The AI boom is on borrowed time
The hype around the AI boom could be on its way out – but why?
By Alex Rankine Published
-
Diploma: a blue-chip set for strong growth
Diploma, whose niche products include seals and fasteners, serves an array of growth markets. Should you invest?
By Dr Mike Tubbs Published