Buffett's Move Into Gold

Many investors are talking about the recent move by Berkshire Hathaway (BRK.B) to invest $565M in Barrick Gold (GOLD) for a 1.2% stake.  This is especially important since Warren Buffett in the past has has not recommended investing in gold due to its lack of a financial return (yield) or productive use (other than potentially increasing value).  His track record lately hasn't been the best (buying airlines on the way down and selling at the bottom) and some have even questioned whether he has lost his touch.  However, his recent moves to sell banks and buy a gold miner look to be a very smart move by the Wizard of Omaha.

With interest rates being incredibly low and looking to stay that way for a long time, banks will have a difficult time being profitable in such a low interest rate environment and many are saddled with bad loans which may get worse as the recession grinds on.  Also, the decline in the value of the dollar (expansion of the money supply - see chart below) is driving up the value of gold (as shown in the chart above), making the gold mining business very lucrative.  Also, Barrick produces a significant amount of copper and as the economy recovers, so will demand for this mineral that is essential to many industrial products.

Some are even saying that this news may impact the price of Bitcoin, driving it up even higher (who knows, Buffett may eventually invest in Bitcoin too).  As is the case with Bitcoin, gold is very volatile at the moment and has seen extreme price spikes both up and down, so investing in gold requires considerable patience.  One of the best ways to invest in gold is to simply buy some gold coins and put them in a safe deposit box and hold on to them.  Owning some gold and silver as a portion of your overall portfolio clearly makes a lot of sense in today's world and is further validated by Buffett's recent moves.  If you are interested in learning more about investing in gold and silver, check out my book here.  You might also be interested in learning about other investing strategies in a declining dollar environment - see my recent post here.

Stay safe, healthy and positive.  I hope you find this post useful as you chart your personal financial course and Build a Financial Fortress in 2020.

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