Warren Buffett is one of the world’s most successful investors, starting with $100,000 and amassing a net worth estimated at over $21 billion since 1972.
Buffett’s core value investing principle is to seek investments with practical uses; precious metals don’t fit this mold.
Why Buffett Doesn’t Invest in Gold
Buffett’s investment style revolves around finding value in things with practical applications; gold doesn’t fit this description.
In a 2009 episode of CNBC’s Squawk Box, he explained why. According to him, nonproductive assets like an oil well or clothing factory offer some utility; an ounce of gold however does not.
He further states that there are better alternatives to gold for storage purposes. We could place our funds in bank accounts or IRAs; or invest them in businesses with dividend-paying businesses or stock market indices offering returns.
Why Buffett Doesn’t Invest in Silver
The Oracle of Omaha is an iconic investor. He ranks second globally and his firm, Berkshire Hathaway, has over $31 billion in assets. Buffett employs traditional value investing principles by seeking resilient businesses trading at or below their intrinsic values on the stock market; as an unconventional investor who has consistently defied mainstream investment trends throughout his career and amassed wealth for himself in doing so.
Buffett has long criticized gold as an ineffective asset favored by investors fearful of paper money, with his focus being more on productive assets such as real estate and index funds than precious metals like gold or silver. While Buffett agrees that inflation concerns must be taken seriously, gold may not be the ideal way to preserve wealth; silver on the other hand meets his value investing criteria and is much more affordable.
Why Buffett Doesn’t Invest in Platinum
After making his mark as a textile magnate, Warren Buffett turned his focus towards expanding Berkshire Hathaway by purchasing assets across media (The Washington Post), insurance (GEICO), and oil (Exxon). Yet despite these successes, Buffett remains firm in his dislike of precious metals.
He has explained his reasoning on multiple occasions and it revolves around value. According to him, investors should only purchase assets that can provide useful services or create real economic benefits to society – so unproductive assets like gold fail the test.
Buffett has stated that his firm isn’t interested in purchasing gold mining companies; however, this doesn’t imply he doesn’t appreciate platinum as an alternative hard asset portfolio diversifier; yet no public moves have been taken by him to acquire this precious metal yet.
Why Buffett Doesn’t Invest in Palladium
One of the more notable events during COVID-19 pandemic was when news came that Warren Buffett, known for avoiding gold investments, had invested in major gold miner Barrick Gold (NYSE: GOLD). This investment generated widespread enthusiasm for precious metal stocks – including Canadian firms such as NovaGold Resources Inc (TSX: NGD).
Buffett considers value to be determined by usefulness, and silver meets this criterion. Used for everything from bandages and catheters to water purification systems and medical treatments, silver also boasts numerous industrial applications that make its worth evident. Furthermore, its excellent conductivity properties allow it to be utilized in electronic devices like computers and smartphones.
Though precious metal investing generally does not yield cash flow, I see physical bullion as having its place as part of an overall portfolio. Gold can serve as an excellent hedge against inflation and stock market crashes; that is why I keep a small allocation in physical bullion in my portfolio.
