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Buffett on Gold

Sham Gad profile picture
Sham Gad

Buffett was recently asked about gold in a conversation with Ben Stein. His answer was typical Buffett: short, direct, and steeped in common sense and logic.

You could take all the gold that's ever been mined, and it would fill a cube 67 feet in each direction. For what that's worth at current gold prices, you could buy all -- not some -- all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?

No need to for me to ramble any futher on this one. Read the rest by clicking here.

This article was written by

Sham Gad profile picture
Sham Gad is the founder and Managing Partner at Gad Capital Management in Athens, Georgia. He runs the Gad Partners Fund, an investment partnership inspired modeled after the 1950's Buffett Partnerships.

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Comments (21)

Beachboy profile picture
Positive Equity: Everyone, no matter what his / her pedigree, is entitled to an opinion here regarding a topic such as Buffett's terse dismissal of gold being less of an investment than cash and American manufacturing/industrial stocks. If you really know Buffett, he is no different from anyone who wants to make more money in investments. Buffett has in fact invested in precious metals. He also makes big mistakes and misses opportunities just like any other financial expert. Read his book "Snowball" -- which he gives credit mostly to Charlie Munger, his financial guru.
Positive Equity profile picture
Buffett Says U.S. Credit Is Good, Will Pay Debt Obligations !!!

"Our credit is good. It's not like if we don't pay we can't pay. We have the right to print our own money. The U.S. is a very special place."

Positive Equity profile picture
Good article!
Good advice.
Buffet knows something about value the rest of the gold pushers don't want to admit. Gold is overpriced as a commodity.
That's really bad advice from Warren. The Chinese and Russians will purchase every piece of gold Warren Buffet doesn't want.

When you write about value stocks on TheStreet.com you are informative and helpful. Stick to what you know....
Robert Schwartz profile picture
From January 2000 to November 2010, the market cap of ExxonMobile has risen ~ 16%. In contrast, the price of gold has risen ~ 380% over the same period (unadjusted for inflation).

Robert H. Schwartz, Ph.D.
RHS Advisors, LLC
"Life-sciences Consulting
Beachboy profile picture
Buffett is not exactly the oracle of all investments. Witness his Berkshire A and B stocks which have not performed in a parabolic arc as gold and silver have. If he were the buy and hold guy of all time, he would and should have bought lots of gold...
Positive Equity profile picture
Last time I looked no one from the Economist was asking Beachboy about his thoughts on the markets or companies. So your criticism of Buffet is worthless.

Buffett is a great investor. He invest in companies that create jobs and value for share holders.
drgrant profile picture
It is very surprising that the smartest investor and the second richest person worldwide does not see the value of Gold & Silver are a store of value and as a Precious Commodity that can NOT be printed by any government and it is the best inflation hedge in troubled time. I thought that both Mr. Buffet & Mr. Gate own a large amount of Gold & Silver to protect their investment?
I recommend that Mr. Buffet buy and HOLD GOLD & SILVER NOW at current prices before they become much higher than his BRK Stock! Dr. George Grant, Ph.D.
Buffet is full of himself. He is getting to sound/act more and more like the scourge of this planet: George Soros!
auto44 profile picture
(schwart) gold 1982----450 2000-----325
gold 2000---325 2010-----1,350
xom1990----12 2000-----39
xom 2000-----39 2010-----70
brk-a 1990---7,455 2000-----44,000
brk-a2000--44,000 2010------120,000

In the decade you mentioned gold surely glistened compared to almost any stock. However over a longer time period not so much. I used 1982 because 1980 at 800 would not be a fair comparison. I couldn't find a chart for stocks that went back to the early 80's. The question is when and will the current gold market turn into 1980. If gold were in the form of a 67 cubic Ft. Indivisible block it would truly be worthless and useless except maybe you could charge admission for folks to view it. But it is not in that form. It is in a lot of different forms. The form that is driving this market is the form hoarding in different physical sizes. Folks trying to defend the purchasing power of their savings. It is these folks mind set that is driving the market, as more folks acquire the same mind set the market rises further. At some point the mind set may revert and if it does prices will fall. But who knows if where or when?

As for the previous quote from soros, all I can say is soros wishes he were a pimple on Buffet's pimple.
Apparently I have been BANNED from Seeking Alpha based upon the above comment where I say George Soros is the scourge of this planet.

Free speech is on its way out anyway--particularly if Soros has his way--and he will! He says so!

When one expresses an opinion that is contrary to the progressive liberal left expect realiation.
The more value those farmland and Exxons produce, the higher gold price will be to represent the wealth accumulated by these properties.

I am not a farmer, I am not a phone maker/seller. I save my surplus labour/produce in a vehicle that will keep pace with wealth increases of the world: gold.

That arguement by Warren Buffett is really %(&*@@%&^!. The Buffett arguement shows an intellectual blindspot: it's an idealogy based nonsense.
auto44 profile picture
It would beat having a cube of depreciating paper that big. You notice he didn't think keeping paper currency was a good idea. He put up a lot of cash and borrowed a lot of depreciating cash to buy BNSF at a very high premium to the market price largely because he knows how quickly cash depreciates and that he would be paying back those loans with paper whose purchasing power had slipped since he made the loan.
auto44 profile picture

The big metal cube would cause less trouble and worry. Warren is one of my heros but I cannot agree with him on this.
If Buffet tried to buy the "cube" he would never succeed. It would drive the price of the cube's contents so high, he would need 100 or 1000 Exxon Mobils - maybe no amount of Exxon Mobils will suffice. Funny thing about gold. I don't think he or any other billionaire could buy the "cube" as tantalizing and possible as it may seem based on its current price.
The question should be;
Why is this "cube" worth so much value as to equal all that is listed?

Its not "worth" more. The fiat currency that purports to act on it's behalf is worth less! Takes more, and more pieces of paper to buy an ounce. If this trend continues to it's endgame, then eventually they become not only worth less, but worthless!

Now, which do you take? The cube please! You may keep the paper.
Until mankind devises a new currency system that cannot be manipulated at will by the politicos as this rediculous Fiat currency system is, gold will remain in its position. The position of wealth preserver. The global currency crisis now clearly visable will simply drive more and more into aquiring PMs....as it should.
Gold's function is not to "produce" value. Buffett still thinks only in US terms (Israeli acquisition notwithstanding). Gold is the ultimate "greater fool" investment, but several thousand years of human lust for gold will not fade given the weakness of global currencies.
Robert Schwartz profile picture

Excellent point. That said, it would be interesting compare the differential value these assets (i.e., 10 Exxon mobiles, FMV of farms, etc. vs the "cube" of gold) over a 10-year period.

Robert H. Schwartz, Ph.D.
RHS Advisors, LLC
Roger Knights profile picture
"... Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?"

He could have posed a similar rhetorical question ten years ago, but his preferred answer would have been wrong. Gold would have produced more value--for the investor.
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