Warren Buffett does not invest in gold. He has invested almost $1 billion in silver, so the reason for his aversion is not simply a dislike for precious metals. The explanation for Buffett's dislike of gold and for his enthusiasm about silver stems from his basic value investing principles.
Key Takeaways
- Warren Buffett has been vocal that he feels gold lacks value because it lacks usefulness.
- A key principle of value investing, as Buffett practices it, says you should only invest in things that serve some practical purpose.
- Silver has myriad uses, and Buffett has invested nearly $1 billion in it.
Warren Buffett has been very vocal about his disdain for gold as an investment. He sees little to no value in it. What Buffett refers to as a lack of value results from a lack of usefulness. He once stated about gold, "It doesn't do anything but sit there and look at you."
One of Buffett's basic principles of investing is that one should only invest in things that are useful and that serve some purpose and that supply some practical need that people have. Silver has a myriad of industrial and medical uses. In medicine, silver is used in bandages, catheters, and as a healing agent for burns and other health conditions. It's also used for water purification. In electronics, silver is the best metal conductor of electricity and doesn't corrode, so it's used extensively in wiring and connective parts, computers, cellphones, and cameras. It is even used to coat DVDs because it is scratch-resistant.
Therefore, silver meets Buffett's requirement of having a real and identifiable value. Even better, from the point of view of an investor, silver is almost uniquely suited to a number of the uses it serves as an industrial metal and would be difficult to replace with any substitute material.
Gold does not meet Buffett's usefulness requirement. Although it has some industrial applications, it is not virtually irreplaceable as silver so often is. Gold makes pretty jewelry, but it is by and large without practical uses. In Buffett's opinion, since it has virtually no inherent value, it is not a good financial asset. The metal commodity that glitters for Buffett is silver, not gold.
FAQs
Buffett therefore doesn't see any utility in owning gold because it can't produce things. Stocks can grow earnings and profits and pay dividends, and farmland produces fruits and vegetables that can be used and sold, but gold just sits there, waiting for someone to come along and decide to pay more for it.
What gold did Warren Buffett buy? ›
Given Buffett's aversion to gold, market watchers were understandably surprised when Berkshire Hathaway invested in Barrick Gold (TSX:ABX,NYSE:GOLD) in Q2 2020, paying around US$560 million for about 21 million shares of the major gold miner.
Why is everyone investing in gold? ›
Central banks see gold as a long-term store of value and a safe haven during times of economic and international turmoil. Gold is considered a resilient investment. When interest rates fall, gold prices tend to rise, as bullion becomes more appealing than income-paying assets like bonds.
What are the arguments against investing in gold? ›
Some argue that gold is a relic that no longer holds the monetary qualities of the past. In a modern economic environment, paper currency is the money of choice. Critics contend that gold's only benefit is the fact that it is a material used in jewelry.
Why is gold a good stock to buy? ›
By including gold stocks in your portfolio, you can potentially reduce overall risk and volatility, as gold tends to perform differently than traditional assets. In turn, adding gold stocks to your portfolio may help offset losses from other types of investments during periods of market turmoil.
Are billionaires buying gold? ›
The average UHNWI holds about 2% of their net worth in gold. While that's more than they keep in cryptocurrencies (1%), it's less than they keep in any other asset classes. In fact, wealthy investors even put more money into “investments of passion” such as fine art, wine, and cars than they do in gold.
What does Warren Buffett not invest in? ›
Warren stays away from technology companies because he likes investments in which he can predict winners a decade in advance—an almost impossible feat when it comes to technology. Unfortunately for Warren, the world of technology knows no boundaries.
Is it wise to buy gold now? ›
While it may seem advantageous to wait for prices to fall before you buy gold coins and bars, doing so could be a mistake. After all, there's no guarantee that the price of gold will fall in the future. But that's not the only reason it makes sense to buy gold, even at today's high prices.
Should I buy gold in 2024? ›
The commodity can also protect your portfolio from the stubborn inflation we've seen thus far in 2024 while acting as a diversification tool that could increase your risk-adjusted portfolio returns. So, consider adding gold to your portfolio today while it has the potential to grow in value.
What will gold be worth in 2025? ›
Gold's price forecast for 2025 at the Bloomberg Terminal is between $1,709.47 and $2,727.94. Bloomberg Intelligence Strategist Mike McGlone predicts that both gold and its “digital version,” bitcoin, will appreciate by 2025.
Stocks have generally performed better than gold over the years, but there can be exceptions. Looking back 20 years, for example, gold has outperformed the S&P 500.
Has gold ever been a bad investment? ›
As a result, gold also can be considered a risky investment, as history has shown that the price of gold does not always go up, particularly when markets are soaring.
Is it better to own gold or gold stocks? ›
Whether to hold physical gold or invest in gold exchange-traded funds requires examining the trade-offs with each, including their liquidity, costs, returns, risks, and the practicalities involved. In general, gold ETFs offer some tax advantages and lower costs over time than trading physical gold.
What will gold be worth in 5 years? ›
What will gold be worth in 5 years? Two Jakarta-based commodity analysts forecast that the price of gold could reach as high as $3,000 per ounce in the next five years. While they remain bullish, they cautioned that many factors could affect the price of gold within this timeframe.
Why are gold stocks risky? ›
However, investing in gold stocks also introduces a different set of risks. Unlike physical gold, which maintains its intrinsic value, the performance of gold stocks is heavily dependent on the operational and financial success of the underlying companies.
What's the best thing to invest in right now? ›
11 best investments right now
- High-yield savings accounts.
- Certificates of deposit (CDs)
- Bonds.
- Money market funds.
- Mutual funds.
- Index Funds.
- Exchange-traded funds.
- Stocks.
The CEO of Berkshire Hathaway began building his wealth by investing in the stock market at age 11, according to Forbes, and first filed a tax return at the age of 13. As a teenager, he was raking in about $175 a month by delivering The Washington Post — more than his teachers (and most adults).
Who is buying the most gold? ›
China has been the largest buyer among central banks, lifting its total gold reserves by 225 metric tons last year - making 2023 the country's highest single year of reported additions since at least 1977, the World Gold Council said.
What jewelry company does Warren Buffett own? ›
1996. Helzberg Diamonds is acquired by Warren Buffett's company, Berkshire Hathaway.
What does Ray Dalio think about gold? ›
Billionaire investor Ray Dalio says he's owning gold to hedge the risk of debt and inflation crises. Ray Dalio says he owns gold partly to hedge against debt and inflation risks. The legendary hedge fund founder cast another warning on rising debt balances around the world.
