In this video we go over Warren Buffetts investment in a gold mining company and the reasons why he’s done this…
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I got to be honest when I initially saw this, I thought it was an April fools joke. But of course we are many months away from April and it was no joke, Warren Buffett has finally bought goldâŚ
His investing company Berkshire Hathaway Has bought 20.9 million shares in the stock Barrick Gold Corporation, With a total value of 564 million dollars. So technically he did not directly buy gold, but he bought a company that mines and sells gold.
Now this is interesting, because those of you who know Buffett will know that he has bashed investing in gold for a long-time nowâŚ
He said back in the day that â(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.â.
But then 2020 comes around we look at his 13f filings, and what do we see, none other but a gold company in there. Over $500 million dollars of Barrick Gold corporation bought. So the question must become, why the change of tune? Why now, in these current market conditions does Buffett decide to invest in Gold. This Charlie Munger clip, might give us a bit of hint as to whyâŚ
So there are a few conditions in terms of the economy in terms of the stock market where Munger believes it is a smart investment to buy gold. And we might be seeing these conditions in today’s economy. But also remember this, itâs not like Buffett has gone and put a massive position on gold. $564 million might seem like a big investment, but for Berkshire, it only makes up 0.28% of the entire portfolio.
Nevertheless it is a change of Tune for Buffett, and I want to go over some of those reasons why his investing company might be buying gold.
The first thing we need to understand is that he uses cash to buy gold. So if Buffett wanted he could leave this $500 odd million dollars in cash. The only problem with this, is that cash is very quickly becoming devalued in todays environment. We all know that the Fed, uncle Jerome, has been printing a lot of money over the past couple of months, in the form of stimulus checks and loans, in order to prop up the economy. Over just 3 & a half months, the federal reserve has printed a little over $3 trillion dollars to help American citizens and businesses.
The problem with this is it devalues the current money in the system.
Iâll give you an example. Letâs say there were 3 trillion trees in the world and they were each worth $100. But then you planted an extra 3 trillion trees. Well those original trees would not be worth as much. Itâs just a simple supply and demand equation.
And thatâs whatâs going on now, the Fed is printing a lot of money, and this devalues the currency. Aka inflation, one of the first things you learn in economicsâŚ
However when you take a look at Gold, you canât just print more gold. I mean donât get me wrong I wish we could, but itâs not possible. There is a set amount of gold in the world, and therefore you canât just devalue it by making more.
This is one reason why a lot of investors believe that gold is a great symbol of safety for when times get volatile, or risky.
So Buffett finally in the 70 however many years heâs been investing decides to buy gold. Now, there are a couple of ways that you can buy into gold. The first is directly buying it. Normally people do this through an etf, which basically just holds a bunch of gold in it, and tracks its price.
The 2nd way, which both Buffett and I believe is a smarter way, is by buying a company that mines gold.
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DISCLAIMER: It’s important to note that I am not a financial adviser and you should do your own research when picking stocks to invest in. These are just some of my viewpoints, by no means would I recommend watching one YouTube video and then immediately buying that stock. This video was made for educational and entertainment purposes only. Consult your financial adviser.