Wall Street considers gold to be a safe haven law as the world fights the Covid-19 pandemic. Gold has also benefited from the weakness in the US dollar.
But Buffett has often talked about why he thinks quality corporate stocks make more sense than owning gold, an asset that does not generate revenue or profit like top corporations do.
Buffett called gold a ‘cube’ that does nothing
Berkshire did not really buy gold. But shares of mining companies typically rise and fall in tandem with the price of the commodity. That it’s hard to be Bullish on a miner when you think gold prices will grind.
But Buffett also pointed out in the 2011 share letter that “what motivates most gold buyers is their belief that the ranks of fears will grow.”
That makes the Berkshire investment in Barrick more remarkable – and possibly helps explain why.
Even though the U.S. stock market bounced back from a short bear market in March and is back near record highs, several investing experts are excited about what will come next.
Some investors are raising concerns about a second wave of coronavirus cases that could further hurt the economy. There are also concerns about the lack of another major economic stimulus plan from Washington.
If all that was not enough, the United States and China renewed their trade tensions. There are also long-term concerns about a disappointing comeback in inflation due to the Federal Reserve’s policy of zero interest rates and trillions of dollars in loan programs.
Berkshire souring on banks and airlines
That Buffett could wager on more fear – and a possible rise in rates – would hurt the economy. There are other signs that Berkshire is taking more steps to position its portfolio for such a decline.
Yet it is not entirely clear from Berkshire’s new stake in Barrick was Buffett’s idea as if it were the brainchild of one of his top two investing lieutenants. Berkshire executives Todd Combs and Ted Weschler help manage Berkshire’s massive investment portfolio. Combs is also the CEO of Geico.
Berkshire was not immediately available for comment to explain the new Barrick investment.
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