Mercer Advisors Logo

Does Warren Buffett Suddenly Like Gold?

Donald Calcagni

MBA, MST, CFP®, AIF®, Chief Investment Officer


CIO Perspective

Gold recently surpassed $2,000 an ounce and the financial press is making a big deal out of Buffett’s new position in gold miner Barrick Gold. The narrative is that Buffett, long a critic of gold, has suddenly found religion and now loves gold. Could this really be the case?

Probably not. Buffett took a position in a gold miner, not gold itself. Gold miners sell gold; they don’t hoard it. If one expects demand for gold to stay elevated (or go higher), then selling gold is a great business. But being in the gold-selling business is very different than buying gold and owning it at $2,000 an ounce. With gold trading at record prices, it makes sense to get and sell more of it—assuming you can acquire gold for less than you can sell it. We know Barrick Gold’s cost of acquisition is less than $2,000 an ounce or else it wouldn’t be in the gold-selling business. Subsequently, they’re well positioned to profit handsomely from the sale of gold. And Mr. Buffett likes profits; subsequently, his new stake in Barrick Gold makes a lot of sense.

One final point. While I’ve long admired Buffett’s value-centric investment philosophy, we should be careful not to ascribe god-like status to any investor. Like most value investors, Buffett’s Berkshire Hathaway underperformed the S&P 500 over the past 10 years. I don’t mean to take away from the stellar returns he earned in the 20th century; he’s done exceptionally well for his shareholders over his long, storied career. But the new millennium, especially the last decade, has been less kind to value investors of all stripes, including Mr. Buffett. So I would urge caution; while the media is quick to worship stock gurus, investors would be well-advised to respect the separation between church and portfolio.

Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved with investment services. Mercer Global Advisors Inc. (“Mercer Advisors”) is registered as an investment advisor with the SEC. The firm only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings shown in this presentation come from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate, but is not guaranteed or warranted by Mercer Advisors. Content, research, tools, and stock or option symbols are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy. For financial planning advice specific to your circumstances, talk to a qualified professional at Mercer Advisors. Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that the future performance of any specific investment, investment strategy or product made reference to directly or indirectly, will be profitable or equal to past performance levels. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals may materially alter the performance and results of your portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client’s investment portfolio. Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results. Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there are no assurances that it will match or outperform any particular benchmark. This document may contain forward-looking statements including statements regarding our intent, belief or current expectations with respect to market conditions. Readers are cautioned not to place undue reliance on these forward-looking statements. While due care has been used in the preparation of forecast information, actual results may vary in a materially positive or negative manner. Forecasts and hypothetical examples are subject to uncertainty and contingencies outside Mercer Advisors’ control. Mercer Advisors is not a law firm and does not provide legal advice to clients. All estate planning documentation preparation and other legal advice is provided through its affiliation with Advanced Services Law Group, Inc.