Does Warren Buffett Invest in Precious Metals?
Warren Buffett is an iconic figure in finance, business, philanthropy and investing. His influence can be found on some of the world’s best known businesses and in shaping investors everywhere.
One of his key contributions has been his position on commodities – particularly gold and silver – which stems from value investing principles.
Why Buffett Doesn’t Invest in Gold
Warren Buffett is one of the world’s richest men and is considered an industry icon by many. However, he has repeatedly made it known that gold does not interest him due to his basic value investing principles.
He categorizes investments as three groups: currency-based investments such as cash and debt instruments; “unproductive” assets like gold that don’t generate income over time; and finally productive assets such as stocks, farmland, or real estate that generate various forms of income throughout their lifespans.
Gold investment resembled the tulip bubble, an uneconomical trend associated with an item without income and that would quickly pop. Silver, on the other hand, makes more sense because of its versatile applications that will endure for generations. That is why he prefers silver over gold.
Why Buffett Does Invest in Silver
Buffett’s entry into silver investing during the late 1990s was an impressive move by his firm. His decision was guided by fundamental value investing principles involving finding undervalued assets with long-term appreciation potential and undervaluation potential.
Silver also meets Warren Buffett’s requirement that an asset must have a useful purpose, with widespread industrial uses for which silver cannot be replaced easily.
Buffett used supply and demand fundamentals as an impetus for his silver purchase. Since 1990, global silver production deficit has averaged approximately 111 million ounces annually; at this rate, all available reserves of precious metal would be depleted within 8.75 years.
As silver prices are expected to increase over the coming years, investors may wish to add precious metals like silver to their portfolios – one way is through investing in US Global GO Gold and Precious Metal Miners ETF (GOAU), an exchange-traded fund which holds most of its holdings in gold (with some silver exposure as well).
Buffett’s Basic Principles of Value Investing
Buffett is an advocate of value investing, where one key principle of the strategy is selecting assets with clear practical applications – silver fits this bill perfectly, serving numerous industrial purposes and being essential in numerous consumer products like cameras, computers and cellphones.
Buffett understands this, which explains his keen interest in buying 130 million ounces of silver despite not significantly altering its price. Furthermore, this explains his move to acquire shares of Barrick Gold (GOLD).
Buffett has changed his views regarding gold and silver investments since his initial scepticism towards them as speculative investments without productive value. Now he recognizes how global disinflationary trends could increase demand for both precious metals.
Buffett’s Conclusions
Buffett has one of the key principles of investing: only invest in something useful or that meets a practical need that people have. Silver fits this criteria because of its myriad industrial uses – from medical applications like bandages and catheters, electronics (it has superior conductivity without corrosion issues) and jewelry use.
Buffett’s Berkshire Hathaway seemed out of step when they purchased gold mining shares to join the current gold fever, seeming out of character with some sophisticated investors who disdaine momentum plays. This move caused considerable shock among some financial experts.
Warren Buffett’s decision to invest in precious metals wasn’t motivated by fear or emotion; rather, it represented his recognition that his long-held philosophy could no longer overlook this sector. This development marks an important shift for silver as well as silver miners whose stocks are performing strongly due to COVID-19 uncertainty.
Categorised in: Blog