No, Warren Buffet Did Not Buy Gold

Mish

Contrary to widespread reporting, Warren Buffett did not buy gold.

Fake Headline: Warren Buffett Buys Gold

Kitco says Warren Buffett buys gold. 

If Kitco would have changed the headline slightly to "GOLD" it would have been accurate but misleading.

GOLD is the symbol for Barrick, a gold miner. It pays a dividend. 

Kitco enhanced its poor headline with a number of Tweets that mostly made the same purposeful mistake.

Not exactly.

Peter Schiff gets the headline correct but Buffett is not tuning into Schiff.

Huge Cave In?

Sea of Change?

Not really. Buffet knows financials are struggling due to Covid. And Barrick pays a dividend.

Barrick Dividends

Barrick Gold Dividends

The above from the Dividend Investor.

Buffett Statements

  • 1998 Harvard Speech: “(Gold) gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”
  • 2009 CNBC Interview: “I have no views as to where it will be, but the one thing I can tell you is it won’t do anything between now and then except look at you. Whereas, you know, Coca-Cola (KO) will be making money, and I think Wells Fargo (WFC) will be making a lot of money, and there will be a lot — and it’s a lot — it’s a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that."

Terrible Timing

Buffett's announcement nailed the top. 

A year ago, Buffett could have bought Barrick for $11.50. In April, Barrick was on sale for $12.61. 

I cannot find what price Buffett paid. We do know Berkshire holds 20.9 million shares valued at $563.5 million at the end of the quarter.

Huge Contrarian Indicator Again?

Buffett was a huge contrarian indicator in 1998 and 2009. Perhaps Buffett provides another one now. 

Regardless, there is no indication Buffett has changed his mind or that buying Barrick represents a sea of change. Barrick is a mere 0.3% of Berkshire's holding.

OK Buffett Dumped Goldman Sachs and some of his Wells Fargo holding, and added to Kroger. 

But this is neither a huge cave-in nor a fundamental sea of change regarding gold. Potentially it is a short-term sell signal that corresponds to the recent pullback.

Addendum

I am not calling a top in gold and I am very heavy in miners. The point of this article was to take exception to the misreporting that Buffett bought gold.

Mish

Comments (27)
Mish
Mish

Editor

Thanks GoldGuy - I believe that is the value at the end of the quarter - June 30. Do you have the purchase dates?

goldguy
goldguy

No, that is all I could find. I do find it interesting that he has come full circle. If what I read is correct (fake news just about everywhere), his father was quite the gold advocate. I suppose the polarity of society has taken hold of him as well. We live in interesting times indeed....BTW love your blog, been reading it since inception.

Realist
Realist

Regarding gold itself, I agree with Buffett. A bar of gold does nothing but sit there. It does not pay a dividend. It does not grow the economy. By itself, it is pretty useless unless it is melted down and put to use in electronics, jewelry, coins etc.

I can understand his investment in a gold mining company that pays a dividend and can grow its business. I have a few similar investments myself.

But even I have a few bars and coins kicking around. And my wife has a bit of gold jewelry. Though I don’t look at it as an investment. It is more like a small amount of insurance. I also kept a small amount of bitcoin (also as insurance) after profiting from an earlier purchase.

Not counting the tiny amount of gold and bitcoin, my investments are heavily diversified in productive assets. I see no reason to own art, baseball cards, old automobiles, beanie babies etc. I would rather see my investments grow the economy and provide jobs.

anoop
anoop

He bought gold that still in the ground.

NGO13
NGO13

3 points not widely reported

  1. the bet size Berkshire has in Barrick is about 0.1% of its mkt cap. About 0.3% of its listed portfolio. As at its latest 13-F for end June 2020.
  2. Buffett and other Big investors are routinely granted delays in reporting the details in their 13-Fs. Thats how he surprised the market when he announced his big bet in IBM in 2011. Amongst other large bets Buffet has made that end up surprising the market, when announced. Unless Buffett has completed accumulating his bet - why would he broadcast it? He will then have to chase higher prices- something he dislikes
  3. Most likely, the Barrack purchase was made by one of his two investment lieutenants. Todd Coombs or Ted Weschler. Todd and Ted run a slice of Berkshire money. Maybe 10% tops? So its a bigger bet for one of them. Importantly, Buffett, Todd and Ted have repeated many times in interviews that the two lieutenants have full discretion and autonomy in running their portfolios.

In conclusion, a lot of hot air about a 0.1% bet that most likely was not Buffett’s.

eFrustrated
eFrustrated

No idea why you're saying he bought Gold.
Haven't seen it reported ANYWHERE that he did.
Is it just Mish trying to make a headline in the style of MSM shock horror stories? Methinks so.

Stuki
Stuki

"Buffett was a huge contrarian indicator in 1998 and 2009. Perhaps Buffett provides another one now. "

He's an old man. Been around a long time. The way random works, is that the longer you punt, the more times you will be right, and the more times you will be wrong. That's just an inevitable feature of wasting your life trying to predict dice throws, or any other random event.

Have enough people do it, and there will be outliers who die while still "up." Chances are Buffet will be one of them. No different; aside from all the funds The Fed stole from others to prop up Buffet in order to fool dumb people into believing financialization in any form is anything but a pure theft racket; from how most people who won the lottery will likely pass away before the law of large numbers bring their lifetime earnings from lottery buying into line with expectation.

lol
lol

Buffet knows if Trump is relected he will default on the dept and a dept default by the US means whatever is left of the dollar will be worth less than the Zimbabwe dollar.

Maximus_Minimus
Maximus_Minimus

I wished Buffet bought 100 M ounces of gold to underline how warped the system has become under the longtime monetary bunglership.
Buying GOLD, and selling the banks doesn't have the same effect.

BLUEWIN
BLUEWIN

If you don't think Buffet already has Physical Gold Holdings you are a fool . . . The apple doesn’t falls far from the tree . . . His father was a Gold advocate and Buffet is to good of an investor not to be diversified particularly in today's world. Of Course he is never going to advocate buying Gold because that would send the price through the roof . . . .

sunny129
sunny129

Buffett bought American Barrick gold ''company' shares. The stock symbol for that stock is 'GOLD'!
Why all hallabuloo!?

goldguy
goldguy

I guess the bottom line is that Warren has now elected to signal other funds and money managers a green light to buy gold stocks. Could be a watershed moment, we will see how many other fund managers join the bull market in gold and silver.


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