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Mad Hedge Fund Trader

Mad Hedge Fund Trader

John Thomas, The Mad Hedge Fund Trader is one of today's most successful Hedge Fund Managers and a 40 year veteran of the financial markets.…

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Why Warren Buffet Hates Gold

The “Oracle of Omaha” expounded at length today on why he despises the barbarous relic. The sage doesn’t really care if the yellow metal hit an all-time high today of $1,440. He sees it primarily as a bet on fear. If investors are more afraid in a year than they are today, then you make money. If they aren’t, then you lose money. If you took all the gold in the world, it would form a cube 67 feet on a side, worth $7 trillion. For that same amount of money, you could own other assets with far greater productive power, including:

*All the farmland in the US, about 1 billion acres, which is worth $2.5 trillion.

*Seven Exxon Mobil’s (XOM), the largest capitalized company in the US.

*You would still have $1 trillion in walking around money left over.

Instead of producing any income or dividends, gold just sits there and shines, letting you feel like you are King Midas.

I don’t know. With the stock market peaking around here, and oil trading at $115/barrel in Europe, a bet on fear looks pretty good to me right now. I’m still sticking with my long term forecast of the old inflation adjusted high of $2,300.

By. Mad Hedge Fund Trader

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  • Anonymous on March 03 2011 said:
    What Buffet fails to note,is that you couldn't buy all the US Government debt.Should Gold be worth so much less than that,given that US Treasury debt is so much easier to produce?
  • Anonymous on March 03 2011 said:
    Look, Buffet is buddies with Bernanke and Obama. What do you expect?He understands the rules of the game as it is now run and is good at it. Inflation is not just an arbitrary effect, it is also a tool used to squeeze the poor and middle class.
  • Anonymous on March 03 2011 said:
    What does gold have to do with US government debt? I am with Buffett, his track record beats yours. Gold is only as good as the hype. When hedge funds who brim to the rim with it need to liquidate watch out below. Gold is strictly a speculation, not an investment.
  • Anonymous on March 03 2011 said:
    When does speculation become an investment? Gold has gone up for 10 consecutive years,sounds like a pretty darn good investment to me...
  • Anonymous on March 03 2011 said:
    WB buying farmland with printed money ???From whom ? I give gold !
  • Anonymous on March 03 2011 said:
    I'm so confused. Lately I have been reading nothing buy contradictions. Buy gold, don't buy gold, buy realestate, not it is going lower, $ is crashing, it is not crashing. Buy Dividend stocks, don't buy stocks. How does a person make sense of it all? There is so much reading coming into my computer right now, I'll never get it all read, let along take action
  • Anonymous on March 03 2011 said:
    Interesting take on Gold, but ole Warren must like silver, seeing as he owns almost 200 million ounces of the stuff and BTW he owns two Gold mines in Canada.In fact here is an article on Mr. Buffet about his silver investment. http://silveradvisor.blogspot.com/2011/02/does-warren-buffett-know-something-we.html
  • Anonymous on March 03 2011 said:
    "When does speculation become an investment? Gold has gone up for 10 consecutive years,sounds like a pretty darn good investment to me..."What , WB buying farmland with printed paper ???I pay gold for it.
  • Anonymous on March 03 2011 said:
    Nancy: The value of all the free advice that you are reading is the same as its cost: Zero. Investing is like any trade, and needs to be learned. The key is value investing, pioneered by Warren's teacher, Ben Graham and made accessible in The Intelligent Investor. A fundamental principle is that you need to decide whether you are a conservative or an enterprising investor. Since 1971, when Nixon closed the gold window, the price of one share of Berkshire has gone up by much more than the equivalent value of gold. I have owned Berkshire continuously since 1987, when I paid $3000 each for shares that now sell for $130,000 each. I started buying gold in size in 2003. Since then gold is up 3X, while BRK-A is up by roughly 1.5X. You have to learn how to determine the values of things for yourself. In my experience it is far preferable to learn how to value assets than to try to judge the trustworthiness of advisors. Had Madoff's "investors" realized this they would have been O.K.
  • Anonymous on March 03 2011 said:
    This is just Warren's opinion. If he said gold has been a bad investment, my response would be "Compared to what?" I have not read him acknowledge his father's foresight in knowing the role of gold. Warren wants to remake the world. I just want to make money, and in the process, the world gets remade anyway.
  • Anonymous on March 03 2011 said:
    Uncle Warren appears to be forgetting two simple facts. 1/ No sane gold supporter is advocating that you put EVERYTHING you have into gold, merely a reasonable percentage as a more reliable pure temporary storage of value. 2/ The fundamental driving force behind ANY price / value is, has ALWAYS been and always will be "supply and demand" and it is an inarguable fact that gold supplies are dwindling, most especially the easy to reach and economically mined stores and the Eastern gold demand is GROWING in huge leaps and bounds!! Now even if the religious and cultural motivations for the purchase of gold jewelry are not that apparent to Westerners, I'll bet my socks that even Uncle Warren has a gold watch or two or three in preference to a steel or plastic one!
  • Anonymous on March 04 2011 said:
    Has Warren Buffett become some sort of spokesman for Wall Street and/or politicians? It certainly appears so from his anti-gold commentaries. But over the long term, he surely understands that more than one investment strategy works to create wealth. My conclusion to Warren Buffett's generalisations about gold ( and indeed any other sort of investment he doesn't like) is that they are mostly irrelevant to my investment decisions.
  • Anonymous on March 04 2011 said:
    I would love to buy farmland with worthless paper dollars! I am keeping my gold in my vault, just like the power elite does, and defraud the unsuspecting public with the paper.
  • Anonymous on March 04 2011 said:
    Warren Buffet has a well deserved reputation as an investor --- but that does not make him infallible. He is a smart investor within the system as it exists and perhaps is afraid to buck the establishment, but his FAITH is misplaced.Any organization that ran its VALUE into the ground to the tune of 97% over a hundred years would in ordinary circumstances probably no longer be in existence, YET the Federal Reserve established in 1913 has taken a dollar backed by 88 grams of gold that has maintained its basic purchasing power for over 5000 years to a piece of paper backed by nothing but HOT AIR worth about 3c in purchasing power.The architects of this fiasco who have enriched themselves at the expense of all ordinary working people should not only be FIRED but stripped of their ill gotten wealth and thrown in jail for life for running a Ponzi scheme that makes Bernie Madoff look like a piker by comparison.
  • Anonymous on March 04 2011 said:
    Mark: If you think that gold is undervalued (I do), then two critical questions are: By how much (that is, how do you value it?) and What percentage of your assets do you think that you should have in an undervalued asset? I suggest that those two questions are very closely intertwined. Clearly, in 1971 when Nixon closed the gold window, that was a sign that gold already was undervalued, and I bought it steadily through the 1970s (in coin form) at $35 and $42 per ounce, eventually selling out "too soon" in the $400 - $600 range (but 10X to 15X over a decade isn't too bad. This round I started buying late in 2003 under $400 per ounce, and kept adding steadily and substantially to my holdings to about the $900 level (so my best purchases are up 3X+ and my worst large additions are up about 50%). For the record, I still am a buyer of gold and silver (and shares in companies that mine those metals). One of the few trustworthy, unbiased data sources is Shadowstats.com.
  • Anonymous on March 04 2011 said:
    Maybe Warren will live long enough to realize he has been betting on the wrong horse when the dollar collapses and his investments tank as a result and gold and silver soar in value. What he either dosen't get, or is in on the scam, is that gold and silver ARE REAL MONEY, and the paper stuff he trusts in (based on what) is nothing more than a monopolistic legalized counterfeiting operation made possible by "legal tender laws" that defy the Constitution.
  • Anonymous on March 04 2011 said:
    Myron: Over the course of 60 years, Warren has run an initial stake of under $10,000 to a personal fortune well over $50 billion. Although he is not infallible (and often has stressed just that point), his assessments of probabilities have been sound overwhelmingly. Warren's and Berkshire's investments (heavy overlap) are unlikely to collapse. The question on which we all need to focus is, for example, whether AT THIS TIME some dollar amount that could be used to buy Berkshire shares might be spent better on gold or silver and/or their miners. This is a matter with serious philosophical and practical implications. For the record, I'm HOLDING Berkshire but BUYING metals and miners. If you read the Berkshire Hathaway annual reports over the years (they are available on line for free -- and in this case worth a LOT) you will see that Warren long has been concerned with the potential ravages of inflation, as was Ben Graham before him. Also, check out what Richard Russell has to say.
  • Anonymous on March 04 2011 said:
    There is a story that Buffet, who owned 130 million ounces of silver from 1997 until 2006?, did something naughty to anger the banksters and was forced to sell it all at $14. Could be he's bitter.
  • Anonymous on March 05 2011 said:
    The fraud if Buffet is now clear.He doesn't like gold because he is an insider elitist tied at the hip to the TBTF banks, the FED and the corrupt politicians in DC that have been stealing from the American people through inflation and government bailouts. He hates gold because it is one of the protections the unwashed masses can use to guard against being plundered by he and his kind.Warren and his henchman Charlie Munger are frauds as proven by their taking billions in loans from the FED during the 2008 meltdown.
  • Anonymous on March 09 2011 said:
    [quote name="erich"]What does gold have to do with US government debt? I am with Buffett, his track record beats yours. Gold is only as good as the hype. When hedge funds who brim to the rim with it need to liquidate watch out below. Gold is strictly a speculation, not an investment.[/quote]Ok smart A$$, if gold is only good as it's hype, how much better are the federal notes that buffet calls money. learn from history or you & your posterity will be driving cabs in China while entertaining your assengers in hopes of a tip. WAKE UP buffet is another madeoff, blankfein, jamie dimon.. buffets says the propagation of fear mongers/gold miners aiding in the fear causing gold to rise but he never once mentions the daily arrests of corporate criminals/bankers who screw us left/right the fear caused by a gov that prints so much paper that the world now wants a new world currency. SCREW buffet he's fu&king Idiot
  • Anonymous on March 10 2011 said:
    WB is in bed with Congress,Bernanke and Geither.Listen to what he said, when he said he took a bet on Goldman Sachs, with preference shares. He was confident that the government will bailout the banking sector, and hence the bet in GS.Listen to what his righthand man is saying, Charlie Munger - thank god for bailouts, for those that didnt get it, suck it up and deal with it. WB and Munger loves inflation, as it will push shares up. But real return is low.WB is complete crack. He is using his fame, reputation and financial firepower to get what he wants.
  • Anonymous on March 13 2011 said:
    It`s funny to hear so many criticize nevermind this man has forgotten more about investing than most of us will ever know. Many criticized him when he didn`t invest in dot coms. It`s obvious that this man (Buffet) has obvious cashflow generators (which adjust for inflation).So he`s not too worried about the fall of the dollar. It`s funny how much emphasis people put on fear and their own opinions.
  • Anonymous on March 30 2011 said:
    Buffet is still kicking himself for selling his millions of oz of silver at $7.60 - Few days ago silver hit $38!

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