Jun 24, 2022
Warren Buffett doesn't invest in gold. His investment in silver has exceeded $1 billion, which is why he doesn't like precious metals. Buffett's hatred of gold and enthusiasm for silver are due to his fundamental value investing principles. Warren Buffett has made it clear that he doesn't like gold as an investment. It has little or no value to him. Buffett says that a lack in value is due to a lack of usefulness. Buffett once said about gold that it doesn't do anything except sit there and stare at you. Investors may be reminded of a Warren Buffett metaphor that explains why gold investing could be foolish. This guide tells you Why Warren Buffett Doesn't Invest in Gold.
Buffett pictured himself owning all the gold in the world, which was 170,000 metric tons at the time. He then envisioned a cube measuring 68 feet by 68 feet. He wrote, "Imagine it fitting comfortably into an infield of a baseball game."
The brick would have a value of $9.6 trillion at 2011 prices, which is not far from today's value. Buffett pointed out that you could also have owned all 400,000,000 acres of U.S. crops, Exxon Mobil (16 times), and still have $1 trillion. Buffett suggested that you think about what you would have in the future if you were to decide what you want long-term. Your gold cube will, however, continue to be golden. In a century, the price of gold might be higher or lower. Buffett said you could touch the cube, but it won't respond.
Buffett believed investing should be based on practicality, utility, and satisfaction of a specific need. There are many industrial and medical uses for silver. Silver is used in medicine to make bandages and catheters. It also acts as a healing agent for burns. It is also used to purify water. Silver is an excellent conductor of electricity in electronics. It doesn't rust, so it's extensively used in wiring and connective parts. Because it is resistant to scratches, silver is used to coat DVDs.
According to Buffett, silver must have a tangible and identifiable value. Furthermore, investors will find silver a unique choice for many industrial uses. It isn't easy to replace it with other metals. Buffett's requirement for usefulness does not apply to gold. It isn't nearly as irreplaceable as silver, even though it does have some industrial uses. While gold makes beautiful jewelry, it has no practical applications. Buffett believes gold is not a good investment because it has no intrinsic value. Buffett's favorite metal commodity is silver and not gold.
Gold is not a good investment. Warren Buffett explains it well. He teaches us that gold is not a good investment as it doesn't earn or produce anything. In his shareholder letters, he explains the distinction between productive and non-productive assets. This lesson also includes his explanation. Instead of storing or freezing your money in gold, follow the advice of smart investors. Make money work for your benefit. You can do this by purchasing wealth-building, productive assets that generate more money.
Gold is often promoted as a store of value, a hedge against inflation, or insurance against falling currency values. Any quality investment that produces a high level of return is better than gold. Although a strong argument for gold is rare, it is always readily available. You can also sell gold as fear and anxiety insurance or diversification to protect against deflation, geopolitics, and other factors. The money used to purchase gold goes into deep, unproductive sleep. Any amount of it is awkward, heavy, and difficult to manage.
There are many options for owning gold. These include the traditional gold bars that weigh anywhere from a few grams up to 400 ounces. You can buy it from gold and coin dealers, pawnshops, and major Canadian banks. You can also own gold through jewelry, gold receipts, and derivatives. There are also other options, including ETFs, mutual funds, or stocks of gold mining corporations. ETFs that hold gold have the advantages of being affordable, safe, ownable, and easy to sell. However, gold is not like other investments. It comes with costs, storage issues, security risks, and handling difficulties. There are also tax implications. Investors must also realize that gold is a non-productive asset with no return, making it a poor investment.
Warren Buffett explains how gold can be an investment and the distinction between productive and non-productive assets. Smart investors create wealth by purchasing productive assets essential to their investing success. Gold is not a productive investment.